NMI Holdings (NASDAQ:NMIH) pulls back 6.5% this week, but still delivers shareholders splendid 20% CAGR over 5 years
When you buy a stock there is always a possibility that it could drop 100%. But when you pick a company that is really flourishing, you can make more than 100%. Long term NMI Holdings, Inc. (NASDAQ:NMIH) shareholders would be well aware of this, since the stock is up 154% in five years. But it's down 6.5% in the last week. This could be related to the recent financial results, released recently -- you can catch up on the most recent data by reading our company report.
While this past week has detracted from the company's five-year return, let's look at the recent trends of the underlying business and see if the gains have been in alignment.
Check out our latest analysis for NMI Holdings
To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. By comparing earnings per share (EPS) and share price changes over time, we can get a feel for how investor attitudes to a company have morphed over time.
During the five years of share price growth, NMI Holdings moved from a loss to profitability. That kind of transition can be an inflection point that justifies a strong share price gain, just as we have seen here. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. We can see that the NMI Holdings share price is up 11% in the last three years. Meanwhile, EPS is up 32% per year. This EPS growth is higher than the 4% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat. This unenthusiastic sentiment is reflected in the stock's reasonably modest P/E ratio of 8.89.
You can see how EPS has changed over time in the image below (click on the chart to see the exact values).
We know that NMI Holdings has improved its bottom line over the last three years, but what does the future have in store? This free interactive report on NMI Holdings' balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
NMI Holdings provided a TSR of 3.1% over the last twelve months. But that return falls short of the market. On the bright side, the longer term returns (running at about 20% a year, over half a decade) look better. It's quite possible the business continues to execute with prowess, even as the share price gains are slowing. Most investors take the time to check the data on insider transactions. You can click here to see if insiders have been buying or selling.
If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings.
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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