A few months ago I wrote my first article on private mortgage insurance company National Mortgage, or officially NMI Holdings (NASDAQ:NMIH). I'll call it NMI. I'm back after an excellent Q4 '20 earnings report.
Now NMI is clearly not considered to be "the future". Its P/E ratio sits at a sad 9 of '21 expected EPS, down near the very bottom of the market's range. Not like mighty Zillow (Z), with its sporty 200 P/E. Or Redfin (RDFN), with an even sportier No P/E because it is expected to break even this year.
NMI doesn't even know how to pitch itself. For example, here is NMI's take on home prices this year from its Q4 earnings conference call:
Q: "You mentioned that your losses are predicated on a conservative home price appreciation number. Can you share what that is?"
A: "I won't share what the specific number is…But suffice it to say, it's what I'll call it quite a muted number well below long-term historical averages in terms of what we tend to see on an annual basis for house price growth nationally."
Here is how you pitch home prices, from the pitch masters at Zillow:
"Our Zillow economists have made bold predictions for an even stronger housing market this year. They're projecting a near record of 6.8 million home sales for 21% growth, plus double-digit home price appreciation."
No, all that poor old wallflower NMI can do is generate cash flow. Lots of it. A steady 25% cash return on equity over the past three years, with similar numbers likely ahead. Here's the story.
The cash flow story
Recently I've concluded that cash flow is a more useful measure than reported earnings for mortgage insurers. The difference between the two is various non-cash accruals that accountants make to cash
