Assessing MGIC Investment (MTG) Valuation After Flat Revenue Earnings And New Capital Management Moves

Q4 earnings and capital moves put MGIC Investment (MTG) in the spotlight

MGIC Investment (MTG) drew investor attention after its recent earnings update, which paired flat year over year revenue and an earnings figure in line with expectations, along with a modest post report share price drop.

See our latest analysis for MGIC Investment.

At a share price of US$26.52, MGIC Investment has seen its short term share price momentum soften, with a year to date share price return of a 9.02% decline. However, its 1 year total shareholder return of 16.65% and very large 3 year total shareholder return of 127.82% point to a much stronger longer term outcome.

If this earnings update has you thinking about where to look next in financials and beyond, it could be a good time to scan 19 top founder-led companies as potential long term compounders.

With flat revenue, mixed quarterly headlines and a share price that has stepped back in recent months, the key question is whether MGIC Investment is trading below its intrinsic worth or if the market is already pricing in future growth.

Most Popular Narrative: 6.7% Undervalued

Against MGIC Investment's last close at $26.52, the most followed narrative points to a fair value of $28.42, putting a modest undervaluation in focus and tying it closely to the earnings and credit cycle story for mortgage insurance.

MGIC's continued strong portfolio credit performance, prudent risk management, and lower-than-expected claim frequencies suggest lasting improvements in net margins and lower loss ratios, contributing to higher future earnings stability.

Read the complete narrative. Read the complete narrative.

Curious what kind of revenue runway and margin profile sit behind that fair value, and how a single required return input shapes the whole story? The full narrative explains the growth, profitability and 7.39% discount rate that underpin the $28.42 figure, along with the implied P/E path into the late 2020s, so you can decide whether those assumptions line up with your own expectations.

Result: Fair Value of $28.42 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, still keep in mind that a weaker mortgage origination backdrop or rising delinquencies on the large 2021 and 2022 books could quickly challenge that 6.7% undervaluation.

Find out about the key risks to this MGIC Investment narrative.

Next Steps

Given the mix of positives and watchpoints in this story, it may be useful to review the numbers yourself and form your own view, starting with 2 key rewards and 1 important warning sign.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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