Since September 2020, the S&P 500 has delivered a total return of 94.3%. But one standout stock has more than doubled the market - over the past five years, MGIC Investment has surged 202% to $28.92 per share. Its momentum hasn’t stopped as it’s also gained 28% in the last six months thanks to its solid quarterly results, beating the S&P by 10.3%.

Is there a buying opportunity in MGIC Investment, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Is MGIC Investment Not Exciting?

We’re happy investors have made money, but we're swiping left on MGIC Investment for now. Here are three reasons we avoid MTG and a stock we'd rather own.

1. Declining Net Premiums Earned Reflect Weakness

Net premiums earned are net of what’s paid to reinsurers (insurance for insurance companies), which are used by insurers to protect themselves from large losses.

MGIC Investment’s net premiums earned has declined by 1.3% annually over the last five years, much worse than the broader insurance industry. This shows that policy underwriting underperformed its other business lines.

3. Recent EPS Growth Below Our Standards

While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.

MGIC Investment’s EPS grew at a weak 6.1% compounded annual growth rate over the last two years. On the bright side, this performance was higher than its 2.5% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.

Final Judgment

MGIC Investment isn’t a terrible business, but it doesn’t pass our bar. With its shares outperforming the market lately, the stock trades at 1.3× forward P/B (or $28.92 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're fairly confident there are better stocks to buy right now. We’d suggest looking at our favorite semiconductor picks and shovels play.

Stocks We Would Buy Instead of MGIC Investment

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