Is This the Right Time to Invest in MGIC Investment (MTG)?

Zacks

On Dec 11, Zacks Investment Research upgraded MGIC Investment Corp. (MTG) by a notch to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

MGIC Investment has witnessed positive earnings estimate revisions based on its steady growth momentum in 2014, also reflected by solid earnings results in the third-quarter reported on Oct 15.

Additionally, solid growth in new insurance written, higher origination of mortgage volumes given the improving housing market conditions and lower delinquency loans in both October and November further reassure a steady earnings potential for the fourth quarter as well. Notably, primary new insurance written soared 31.8% year over year for Nov 2014, while delinquency loans plunged 23.4%.

An improved growth trend in 2014 is also evident from MGIC Investment’s earnings performance, wherein the company delivered strong earnings surprises in three of the last four quarters, with an average beat of 43.2%.

Notably, MGIC Investment’s third-quarter earnings of 18 cents per share topped both the Zacks Consensus Estimate and the year-ago figure by whopping 63.6% and 350%, respectively. Lower claims and delinquent inventory coupled with higher new business written primarily drove the bottom line, resulting in significantly improved book value per share as well.

An upward momentum in estimates further raises optimism. The Zacks Consensus Estimate for 2014 and 2015 jumped 20% and 2.4% to earnings of 60 cents and 84 cents per share, respectively, in the last 60 days. Meanwhile, no downward revision in estimates was witnessed for both the years.

Moreover, the estimates reveal a significant rebound from loss per share generated for the past six years. On a year-over-year basis, earnings per share is expected to shoot up over 430% in 2014, followed by an over 40% ascent in 2015.

Other Promising Picks

Investors interested in the insurance sector may also consider players like AmTrust Financial Services Inc. (AFSI), CNO Financial Group, Inc. (CNO) and Navigators Group Inc. (NAVG). All these stocks sport the same Zacks Rank as MGIC Investment.

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