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

Core Viewpoint - NMI Holdings (NMIH) has underperformed the industry and finance sector year-to-date but has outperformed the S&P 500 composite [1] Valuation - NMIH shares are trading at a price-to-book multiple of 1.31, below the industry average of 1.65, indicating an attractive valuation with a Value Score of B [4] - Other insurers like Kinsale Capital, MGIC Investment Corporation, and Radian Group are also trading at a discount to the industry average [5] Financial Performance - NMIH's return on equity (ROE) for the trailing 12 months is 17.3%, significantly higher than the industry average of 8.3%, indicating efficient use of shareholders' funds [6] - The return on invested capital for NMIH in the trailing 12 months is 13.9%, compared to the industry average of 6.4%, reflecting strong income generation efficiency [6] Market Outlook - The mortgage insurance market is expected to grow, providing business opportunities for NMIH, with a strong mortgage insurance portfolio anticipated to support future earnings [9] - The U.S. residential mortgage market is substantial, with nearly $13 trillion in mortgage debt outstanding, which is expected to benefit the mortgage insurance sector [10] - NMIH expects continued strength in the housing market, driven by demand, house price appreciation, and solid new insurance written volume [11] Risk Management - NMIH has a comprehensive reinsurance program that mitigates credit volatility and supports capital growth, enhancing its return profile [12] Shareholder Returns - NMIH has an$80 million share repurchase authorization remaining, indicating a commitment to returning wealth to shareholders [12] Analyst Projections - The average target price for NMIH is $42.50 per share, suggesting a 16.2$4.59, reflecting a 2% increase year-over-year, with revenues projected at $686.4 million [14] - For 2026, earnings per share are estimated at$5.01, indicating a 9.1% year-over-year increase on revenues of $712.7 million [14] Growth Potential - NMIH's improving mortgage insurance portfolio, higher new insurance written volume, and effective capital deployment position the company for growth [15]