MGIC Investment Corporation MTG shares have rallied 35.3% year to date (YTD) compared with the industry's growth of 25%. The Finance sector and the Zacks S&P 500 index have returned 24% and 25.7% YTD, respectively. With a market capitalization of $6.61 billion, the average volume of shares traded in the last three months was 0.1 million. Currently priced at $26.11, the stock is a little below its 52-week high of $26.56.

MTG Outprforms Industry, Sector and S&P YTD

Image Source: Zacks Investment Research

The rally was driven by its solid insurance in force, a decline in loss and claims payments, lower delinquency, better housing market fundamentals and prudent capital deployment, along with solid growth projections.

MTG Trading Above 50-Day and 200-Day Moving Average

This Zacks Rank #3 (Hold) multi-line insurer is trading above its 50-day and 200-day simple moving average (SMA) of $25.21 and $22.63, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.

MTG’s Earnings Surprise History

The multi-line insurer has a decent earnings surprise history. Its earnings beat estimates in each of the last four quarters, with an average surprise of 16.25%.

MTG’s Growth Projection Encourages

The Zacks Consensus Estimate for MGIC Investment’s 2024 earnings per share indicates a year-over-year increase of 11%. The consensus estimate for revenues is pegged at $1.22 billion, implying a year-over-year improvement of 4.5%. 

The consensus estimate for 2025 revenues indicates an increase of 3.5% from the corresponding 2024 estimates.

MTG’s Favorable Return on Capital

Return on invested capital (ROIC) has been increasing over the last few quarters as the company raised its capital investment over the same time frame. This reflects MTG’s efficiency in utilizing funds to generate income. ROIC was 11.4% in the trailing 12 months, better than the industry average of 2.5%.

Will the Bull Run Continue?

Given the strong purchase market and potential share gains from the Federal Housing Administration, MGIC Investment expects strong premium writing. Increased persistency rate should continue to boost insurance in force.

The insurance-in-force portfolio is set to grow, banking on new business and increasing annual persistency. A higher level of new and existing home sales, an increased percentage of homes purchased for cash and an improved level of refinance activity in an improving housing market should help this largest private mortgage insurer in the United States grow.

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.

The insurer is improving its capital position with capital contribution, reinsurance transactions and cash position. Both leverage and times interest earned ratios have been improving.

A solid capital position supports MTG in wealth distribution. As of Oct. 31, 2024, the insurer had $578.6 million remaining under a $750 million share repurchase program approved by the board, which expires on Dec. 31, 2026. Its share repurchase activity reflects continued strong mortgage credit performance.

The Zacks Consensus Estimate for 2024 earnings has moved 1.8% north in the past 30 days, reflecting analysts’ optimism.

Shares are Undervalued

MTG shares are trading at a price-to-book multiple of 1.28, lower than the industry average of 2.43.

Key Picks

Investors interested in the multi-line insurance industry may look at some better-ranked players like EverQuote, Inc. EVER, CNO Financial Group, Inc. CNO and Horace Mann Educators Corporation HMN, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for EverQuote’s 2024 and 2025 earnings implies year-over-year growth of 144.8% and 16.1%, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 149.58%. Year to date, shares of EVER have rallied 60.7%.

The Zacks Consensus Estimate for CNO Financial’s 2024 and 2025 earnings implies year-over-year growth of 20.7% and 0.6%. It beat earnings estimates in three of the past four quarters while missing in one, with an average surprise of 24.51%. Year to date, shares of CNO have gained 45.2%.

The Zacks Consensus Estimate for Horace Mann’s 2024 and 2025 earnings implies year-over-year growth of 69.4% and 43.3%, respectively. It beat earnings estimates in two of the past four quarters, while matched in one and missed in one, with an average surprise of 4.57%. Year to date, shares of HMN have gained 26.7%.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

MGIC Investment Corporation (MTG) : Free Stock Analysis Report

CNO Financial Group, Inc. (CNO) : Free Stock Analysis Report

EverQuote, Inc. (EVER) : Free Stock Analysis Report

Horace Mann Educators Corporation (HMN) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research