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NMI Holdings (NMIH) Up 72% in 6 Months: More Room Left?

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NMI Holdings NMIH shares have gained 71.7% in the past six months compared with the industry's increase of 20.8% and the Finance sector’s increase of 25.7%. The Zacks S&P 500 composite has risen 22% in the said time frame. With market capitalization of $2.1 billion, average volume of shares traded in the last three months was 0.6 million.


 

Growth on new primary insurance written, direct primary insurance in force and an improving risk-based capital ratio continue to drive NMI Holdings. The company beat estimates in all the three reported quarters of 2020.

The company’s return on equity (ROE) has improved over the past three years, reflecting effective utilization of shareholder funds. Its trailing 12-month ROE of 15.7% betters the industry average of 5.6%. The company aims to generate solid mid-teens returns for its shareholders.

Will the Bull Run Continue?

The Zacks Consensus Estimate for 2021 earnings has moved up 0.5% in the past 30 days, reflecting analysts’ optimism. The consensus estimate indicates year-over-year increase of about 7% on 16.7% higher revenues.

This Zacks Rank #2 (Buy) mortgage insurer is poised to benefit from strong mortgage origination market and increased private mortgage insurance penetration rates. It is well poised to capitalize on the opportunity offered by one of the largest residential mortgage markets in the world. Its strong mortgage insurance portfolio is expected to create a strong foundation for future earnings.

The company has comprehensive reinsurance program in place on nearly entirety of in-force portfolio. Thus, it enhances return profile, absorbs loss, provides efficient growth capital and mitigates impact of credit volatility. This apart, it uses individual risk underwriting and granular Rate GPS pricing to target a higher quality mix of business.

NMI Holdings boasts a strong capital position. While it has been lowering its leverage over the years, times interest earned ratio has been improving over the years and is better than the industry average.

Other Stocks to Consider

Investors interested in the same space can also look at Fidelity National Financial FNF, Radian Group RDN and The Allstate Corporation ALL.  
    
Fidelity National delivered an earnings surprise of 18.40% in the last reported quarter. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank.

Radian delivered an earnings surprise of 22.92% in the last reported quarter. It carries a Zacks Rank #2.

Allstate delivered an earnings surprise of 66.10% in the last reported quarter. It carries a Zacks Rank #2

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