MTG Stock Lags Industry, Trades at a Discount: Should You Buy or Wait?

Core Viewpoint - MGIC Investment Corporation (MTG) shares are trading at a discount compared to the Zacks Multi-line insurance industry, with a price-to-book ratio of 1.13X versus the industry average of 2.32X [1] Financial Performance - MGIC Investment has a market capitalization of $5.6 billion and benefits from strong credit performance in its mortgage insurance portfolio [1] - The return on invested capital for MTG in the trailing 12 months was 11.4%, significantly higher than the industry average of 2% [9] - The return on equity for MTG was 14.9%, also above the industry average of 14.4% [9] Stock Performance - MTG stock has decreased by 2.6% year-to-date, underperforming both the industry and sector returns, but outperforming the S&P 500 composite's decline of 4.5% [3] - MTG shares are currently trading below the 50-day moving average, indicating a bearish trend [6] - The Zacks average price target for MTG is $27.14 per share, suggesting a potential upside of 20.3% from the last closing price [6] Growth Projections - The Zacks Consensus Estimate for MTG's 2025 earnings per share is $2.73, reflecting a 6.2% year-over-year decrease, while revenues are expected to increase by 3% to $1.3 billion [7] - For 2026, the earnings per share estimate is $2.86, indicating a 4.8% year-over-year increase, with revenues projected to rise by 3.2% to $1.3 billion [7] - Recent analyst revisions show a positive outlook, with estimates for 2025 and 2026 earnings raised by 2 cents and 5 cents, respectively [10] Market Position and Strategy - MGIC Investment is the largest mortgage insurer in the U.S. and is improving its capital position through capital contributions and reinsurance transactions [12] - The company has $724 million remaining in its share repurchase authorization through December 2026, reflecting strong mortgage credit performance [12] - MGIC is experiencing a decline in claim filings, which is expected to strengthen its balance sheet and improve its financial profile [11] Dividend and Shareholder Returns - MTG recently increased its quarterly dividend by 13% to 13 cents per share, marking four consecutive years of dividend increases at a compound annual growth rate of 21% [14] - The company also engages in share buybacks, with $372 million remaining on its current share repurchase authorization as of January 31 [14] Competitive Landscape - The mortgage insurance market is highly competitive, with significant market share held by a few players, including competition from the Federal Housing Administration [15] - The U.S. housing market is expected to grow slowly in 2025, which may exert downward pressure on home prices and reduce the overall market opportunity for new private mortgage insurance [15]