MGIC Investment Gains 24% YTD: More Room for Growth?

Shares of MGIC Investment Corporation MTG have rallied 23.8% year to date, outperforming the industry's growth of 12.7%, the Finance sector's rise of 10.4% and the Zacks S&P 500 composite's increase of 16.8%. With a market capitalization of $6.2 billion, the average volume of shares traded in the last three months was 1.7 million.

Solid insurance in force, a decline in loss and claims payments, lower delinquency, better housing market fundamentals and prudent capital deployment drive this Zacks Rank #1 (Strong Buy) mortgage insurer.

MTG has a solid earnings surprise history. It surpassed estimates in each of the last four quarters, the average earnings surprise being 15.59%. Earnings of MTG have risen 8.7% over the last five years.

Return on invested capital in the trailing 12 months was 11.4%, better than the industry average of 2.4%, reflecting MTG's efficiency in utilizing funds to generate income.

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Can the Stock Retain the Momentum?

New business, combined with increasing annual persistency, drives growth of the insurance-in-force portfolio. A higher level of new and existing home sales, increased percentage of homes purchased for cash and improved level of refinance activity in an improving housing market should help this largest private mortgage insurer in the United States retain the momentum.

MTG has been witnessing a declining pattern of claim filings. A decline in loss and claims will strengthen the balance sheet and improve the insurer's financial profile.

Banking on capital contribution, reinsurance transactions and cash position, the company has been improving its capital position. Both leverage and times interest earned ratios have been improving.

A solid capital position supports MTG in wealth distribution to shareholders via dividend hikes and share buybacks.  The latest 13% increase in its quarterly dividend to 13 cents per share marked four straight years of dividend increases at a compound annual growth rate of 21%. The company currently has $724 million remaining in its authorization kitty through December 2026. Its share repurchase activity reflects continued strong mortgage credit performance.

The Zacks Consensus Estimate for 2024 earnings is pegged at $2.70 per share, suggesting an increase of 6.7% on 4.7% higher revenues of $1.2 billion. The consensus estimate for 2025 earnings per share is $2.72, suggesting an increase of 0.7% on 4.7% higher revenues of $1.3 billion. The long-term earnings growth rate is expected to be 6.8%.

The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 7.1% and 4.6% north, respectively, in the past 30 days, reflecting analyst optimism. 

Other Stocks to Consider

Other players in the insurance industry are CNO Financial Group CNO, Enact Holdings ACT and Kemper Corporation KMPR, each sporting a Zacks Rank #1.

CNO Financial earnings surpassed estimates in three of the last four quarters and missed in one, the average beat being 21.21%. Year to date, CNO has rallied 16.5%.

The Zacks Consensus Estimate for CNO's 2024 and 2025 earnings implies 11% and 6.2% year-over-year growth, respectively.

Enact Holdings earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 13.96%. Year to date, ACT stock has surged 18%.

The Zacks Consensus Estimate for ACT's 2024 and 2025 earnings indicates 1% year-over-year growth each.

Kemper's earnings surpassed estimates in two of the last four quarters, missed in one and met estimates in one, the average earnings surprise being 6.93%. Year to date, KMPR stock has surged 28.6%.

The Zacks Consensus Estimate for KMPR's 2024 and 2025 earnings suggests 796.6% and 14.6% year-over-year growth, respectively.

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