NMI Holdings' (NASDAQ:NMIH) three-year earnings growth trails the respectable shareholder returns
One simple way to benefit from the stock market is to buy an index fund. But if you choose individual stocks with prowess, you can make superior returns. For example, NMI Holdings, Inc. (NASDAQ:NMIH) shareholders have seen the share price rise 96% over three years, well in excess of the market return (42%, not including dividends). On the other hand, the returns haven't been quite so good recently, with shareholders up just 21%.
Since it's been a strong week for NMI Holdings shareholders, let's have a look at trend of the longer term fundamentals.
Check out our latest analysis for NMI Holdings
In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One flawed but reasonable way to assess how sentiment around a company has changed is to compare the earnings per share (EPS) with the share price.
NMI Holdings was able to grow its EPS at 11% per year over three years, sending the share price higher. In comparison, the 25% per year gain in the share price outpaces the EPS growth. This indicates that the market is feeling more optimistic on the stock, after the last few years of progress. It's not unusual to see the market 're-rate' a stock, after a few years of growth.
The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).
We know that NMI Holdings has improved its bottom line lately, but is it going to grow revenue? If you're interested, you could check this free report showing consensus revenue forecasts.
A Different Perspective
It's good to see that NMI Holdings has rewarded shareholders with a total shareholder return of 21% in the last twelve months. That gain is better than the annual TSR over five years, which is 10%. Therefore it seems like sentiment around the company has been positive lately. In the best case scenario, this may hint at some real business momentum, implying that now could be a great time to delve deeper. It's always interesting to track share price performance over the longer term. But to understand NMI Holdings better, we need to consider many other factors. To that end, you should be aware of the 1 warning sign we've spotted with NMI Holdings .
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges.
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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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