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NMI Holdings (NMIH) Continues to Gain From Solid Premiums

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NMI Holdings Inc. NMIH has been in investors’ good books, owing to growth in monthly and single premium policy production, growth in total investment portfolio and flexible liquidity.

Growth Projections

The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $2.55 and $3.22, indicating year-over-year increase of 16.4% and 26.4%, respectively.

Estimate Revision

The Zacks Consensus Estimate for 2021 and 2022 has moved 7.1% and 7.7% north, respectively in the past 60 days. This should instill investors' confidence in the stock.

Earnings Surprise History

NMI Holdings has a decent earnings surprise history. It beat estimates in each of the last four quarters, with the average being 19.38%.

Zacks Rank & Price Performance

NMI Holdings currently carries a Zacks Rank #2 (Buy). In the past year, the stock has rallied 40.8% compared with the industry’s increase of 39.6%.

Zacks Investment Research
Zacks Investment Research

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Style Score

It has an impressive Value Score of B, which reflects an attractive valuation of the stock. Back-tested results show that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best investment opportunities.

Return on Equity (ROE)

The company’s ROE for the trailing 12 months is 13.1%, better than the industry average of 5.6%, reflecting the company’s efficiency in utilizing shareholders’ fund.

Business Tailwinds

The mortgage insurer should continue to benefit from growth in monthly and single premium policy production tied to growth in the size of the total mortgage insurance market, as well as the increased penetration of existing customer accounts and new customer account activations, which contribute to new insurance written (NIW) growth.

Considering the growth in the size of total investment portfolio, investment income is expected to improve amid the current low interest rate environment. The metric witnessed a four-year CAGR (2016-2020) of 23.4%.

Such premium growth as well as improving investment income is driving the top line, which witnessed a four-year CAGR (2016-2020) of 36.8%. The Zacks Consensus Estimate for the company’s 2021 and 2022 revenues is pegged at $483.4 million and $549.3 million, indicating year-over-year increase of 11.5% and 13.6%, respectively.

NMI Holdings has a comprehensive reinsurance program, which enhances its return profile, absorbs loss, provides efficient growth capital and mitigates impact of credit volatility. It extended its reinsurance coverage across most recent production. In April, NMIC entered into a reinsurance agreement with (Oaktown Re VI) that provides for up to $367.2 million of aggregate excess-of-loss reinsurance coverage on risk that are originated primarily written between Oct 1, 2020 and Mar 31, 2021.

NMI Holdings boasts a strong balance sheet with significant financial flexibility. It has $400 million of outstanding senior notes, and also has access to $110 million of undrawn revolving credit facility (through the 2020 Revolving Credit Facility).

Other Stocks to Consider

Some other top-ranked stocks from the same space are HCI Group, Inc. HCI, Cincinnati Financial Corporation CINF and Alleghany Corporation Y, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The bottom line of HCI Group surpassed estimates in three of the last four quarters and missed the mark in the remaining one, the average beat being 42.91%.

Cincinnati Financial’s earnings surpassed estimates in three of the last four quarters, missing the mark on a single occasion, the average surprise being 17.63%.

Alleghany’s earnings surpassed estimates in each of the last four quarters, the average being 128.63%.

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Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report

Alleghany Corporation (Y) : Free Stock Analysis Report

HCI Group, Inc. (HCI) : Free Stock Analysis Report

NMI Holdings Inc (NMIH) : Free Stock Analysis Report

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