NMIH Stock Lags Industry, Trades at Discount: Time to Buy the Dip?

Shares of NMI Holdings NMIH have lost 0.4% year to date, underperforming the industry’s growth of 16% and the  Finance sector’s increase of 2.4%. The insurer, however, outperformed the S&P 500 composite’s decline of 4.7%. 

However, NMIH shares are trading well above the 50-day moving average, indicating a bullish trend.

Discounted Valuation of NMIH

NMIH shares are trading at a price-to-book multiple of 1.31, lower than the industry average of 1.65. This insurer has a Value Score of B, reflecting an attractive valuation.

Other insurers, such as Kinsale Capital KNSL, MGIC Investment Corporation MTG and Radian Group RDN, are trading at a discount to the industry average.

NMIH’s Favorable Return on Capital

NMI Holdings’ return on equity (ROE) for the trailing 12 months is 17.3%, better than the industry average of 8.3%. This reflects efficiency in utilizing its shareholders’ funds. It targets 13% ROE over the medium term.

Also, the return on invested capital in the trailing 12 months was 13.9%, better than the industry average of 6.4%. This reflects the insurer’s efficiency in utilizing funds to generate income.

Muted Analyst Sentiment on NMIH

The Zacks Consensus Estimate for 2025 and 2026 earnings has moved 1 cent down each in the past 30 days.

Factors Favoring NMIH

NMI Holdings stands to gain from business opportunities from a growing mortgage insurance market. Its mortgage insurance portfolio is expected to create a strong foundation for earnings going forward. NMI Holdings’ superior primary insurance in-force portfolio generates industry-leading growth.

Per the Federal Reserve, the U.S. residential mortgage market is one of the largest in the world, with nearly $13 trillion of mortgage debt outstanding as of Dec. 31, 2024, and includes both primary and secondary components.  The mortgage insurance market environment remains constructive and should continue to benefit from a strong mortgage origination market and increased private mortgage insurance penetration rates. 

NMIH expects the housing market to remain strong with continued demand, appreciation in house prices, a favorable mortgage insurance market, better pricing and solid new insurance written volume.

NMIH has been focused on efficiency and expense management to improve margins.

Its comprehensive reinsurance program for its in-force portfolio shields it from credit volatility, enhances its return profile, absorbs losses and supports capital growth. NMIH returns wealth to shareholders through buybacks and has an $80 million share repurchase authorization remaining under its kitty.

All these together should help the insurer continue generating solid mid-teen shareholders’ returns.

Average Target Price for NMIH Suggests a Solid Upside

Based on short-term price targets offered by eight analysts, the Zacks average price target is $42.50 per share. The average suggests a 16.2% upside from the last closing price.

Optimistic Growth Projections

The Zacks Consensus Estimate for NMI Holdings’ 2025 earnings is pegged at $4.59, which indicates a 2% increase from the year-ago reported figure on 5.4% higher revenues of $686.4 million. The consensus estimate for 2026 earnings per share is pegged at $5.01, which implies a 9.1% year-over-year increase on 3.8% higher revenues of $712.7 million.

The expected long-term growth rate is pegged at 5.4%.

Parting Thoughts on NMIH Stock

An improving mortgage insurance portfolio, higher new insurance written volume, a comprehensive reinsurance program, a solid capital position and effective capital deployment poise NMI Holdings for growth. 

Though its leverage compares favorably with the industry average, lower times interest earned keeps us cautious. Given muted analyst sentiment and a VGM Score of D, it is better to adopt a wait-and-see approach for this Zacks Rank #3 (Hold) stock.  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research