Even though NMI Holdings (currently trading at $35.95 per share) has gained 7.4% over the last six months, it has lagged the S&P 500’s 24.4% return during that period. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Given the relatively weaker price action, is now a good time to buy NMIH? Find out in our full research report, it’s free for active Edge members.
Why Are We Positive On NMIH?
Founded in the aftermath of the 2008 housing crisis to bring new capacity to the mortgage insurance market, NMI Holdings (NASDAQ: NMIH) provides mortgage insurance that protects lenders against losses when homebuyers default on their mortgage loans.
1. Net Premiums Earned Drive Additional Growth Opportunities
When insurers sell policies, they protect themselves from extremely large losses or an outsized accumulation of losses with reinsurance (insurance for insurance companies). Net premiums earned are therefore net of what’s ceded to reinsurers as a risk mitigation and transfer strategy.
NMI Holdings’s net premiums earned has grown at a 9.8% annualized rate over the last two years, a step above the broader insurance industry.
3. Growing BVPS Reflects Strong Asset Base
In the insurance industry, book value per share (BVPS) provides a clear picture of shareholder value, as it represents the total equity backing a company’s insurance operations and growth initiatives.
NMI Holdings’s BVPS increased by 16% annually over the last five years, and growth has recently accelerated as BVPS grew at an excellent 21% annual clip over the past two years (from $21.25 to $31.14 per share).
Final Judgment
These are just a few reasons why we think NMI Holdings is a great business. With its shares lagging the market recently, the stock trades at 1.1× forward P/B (or $35.95 per share). Is now a good time to initiate a position? See for yourself in our in-depth research report, it’s free for active Edge members.
Stocks We Like Even More Than NMI Holdings
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