NMI Holdings: Earnings Beats And P/B Expansion Expected As Residential Housing Shines (NASDAQ:NMIH

published 02.08.2020 12:19

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NMIH's stock has appreciated ~11% since I began coverage on the PMIs in May of 2020, slightly lagging the S&P 500 by ~2%.

Below is a quarterly look at the four pure-play PMIs' ROEs, TTM revenue growth rates, and P/B ratios: Not only has NMIH's top line been exploding, but it's also gradually been improving the bottom line as the business has scaled.

During the height of the market sell-off in March, NMIH traded as low as $8.06 inter-day, a P/B of 0.59x, clearly sending the message that the market expected massive mortgage defaults and a sharp decline in housing prices.

If NMIH's Q2 earnings beats, as I'm expecting, and they give an optimistic assessment similar to ACGL, I believe the sell-side will be raising their price targets.

Based on the macro backdrop and ACGL's earnings, I expect all of the pure-play PMIs to perform well going into earnings, but I am particularly bullish on NMIH given its significantly lower default rate as of quarter end.

by Western Edge from seekingalpha.com

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