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At US$13.13, Is It Time To Put MGIC Investment Corporation (NYSE:MTG) On Your Watch List?

Simply Wall St

MGIC Investment Corporation (NYSE:MTG), operating in the financial services industry based in United States, received a lot of attention from a substantial price movement on the NYSE over the last few months, increasing to US$13.91 at one point, and dropping to the lows of US$12.01. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether MGIC Investment's current trading price of US$13.13 reflective of the actual value of the mid-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at MGIC Investment’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.

View our latest analysis for MGIC Investment

Is MGIC Investment still cheap?

Good news, investors! MGIC Investment is still a bargain right now. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 7.14x is currently well-below the industry average of 14.63x, meaning that it is trading at a cheaper price relative to its peers. Although, there may be another chance to buy again in the future. This is because MGIC Investment’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

What does the future of MGIC Investment look like?

NYSE:MTG Past and Future Earnings, September 27th 2019

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -2.7% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for MGIC Investment. This certainty tips the risk-return scale towards higher risk.

What this means for you:

Are you a shareholder? Although MTG is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. Consider whether you want to increase your portfolio exposure to MTG, or whether diversifying into another stock may be a better move for your total risk and return.

Are you a potential investor? If you’ve been keeping tabs on MTG for some time, but hesitant on making the leap, I recommend you dig deeper into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.

Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on MGIC Investment. You can find everything you need to know about MGIC Investment in the latest infographic research report. If you are no longer interested in MGIC Investment, you can use our free platform to see my list of over 50 other stocks with a high growth potential.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.