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NMI Holdings: The Rising Star Of The Mortgage Insurance Industry

May 01, 2020 5:21 PM ETNMI Holdings, Inc. (NMIH)21 Comments
Federico Ochoa CFA profile picture
Federico Ochoa CFA


  • The company has enjoyed impressive growth and is challenging the established industry leaders.
  • The company's strong workforce results in a very high level of revenue per employee and healthy EBITDA margins.
  • Great entry point: Despite its strong financial position, YTD, the stock is down 60% compared to a range of decline of 18% to 47% for its peers.

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NMI Holdings Inc. (NASDAQ:NMIH) provides mortgage insurance, an insurance product required to be paid by mortgage borrowers who make down payments that are lower than 20% of the home purchase price. We are bullish on NMIH because the company has a strong balance sheet to survive the storm, the current stock price provides an attractive entry point and the company has demonstrated its ability to compete against larger rivals.

We arrive at a fair value of $16 (rounded up) by taking the average of our comparable analysis ($14.23) and DCF model ($17.14), as explained in detail below. We assign a rate of "Overweight" because we expect the company's past growth to continue into the long-term future despite the potential hurdles the mortgage insurance industry is likely to face in the near term.

Founded in 2012 by Bradley Shuster and Jay Sherwood, NMIH sells mortgage insurance nationwide to its 1,476 customers, which include national banks, regional banks, credit unions and community banks. With $97 billion of total Insurance In Force (IIF), the company has made a name for itself as a high-quality player that delegates underwriting (with no verification) for only 5% of its loans. The remaining 95% of loans are either underwritten directly by the company or delegated with an independent verification.

(Created by Author using company's 10K report and Yahoo Finance)

Recommendation and Investment Thesis:

With unemployment rising to record levels, it is certain that mortgage defaults will increase in 2020. In addition, new loan production is likely to be minimal as would-be-home-buyers may be

This article was written by

Federico Ochoa CFA profile picture
Federico Ochoa, CFA has 14 years of professional Finance experience. He is currently a Director in the Finance department of Marriott International headquarters where he works on valuations of new property development and asset management of existing hotels in various countries in South America. Federico worked in Europe for 4.5 years and received the CFA charter in London in 2017. Prior to Marriott, Federico worked for BB&T bank as a Credit Analyst, Commercial Lender and Portfolio Manager. In his latest role, Federico managed a $120M commercial loan portfolio. He graduated from the Georgetown MBA program in 2012 and served in the Georgetown Club of the U.K. board. He enjoys investing in the stock market and playing tennis.

Analyst’s Disclosure: I am/we are long NMIH. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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