Last Update 30 Oct 25
Fair value Increased 1.22%MGIC Investment's analyst price target has been raised by $0.67 to $27.67. Analysts cite improving credit performance and optimism in the mortgage market, balanced by ongoing caution over elevated rates.
Analyst Commentary
Analysts recently offered perspectives on MGIC Investment in light of the raised price target, highlighting a mix of optimism and ongoing caution as the company approaches its next earnings period.
Bullish Takeaways
- Credit performance continues to be robust after over two years of tightened lending standards. This supports confidence in asset quality and reduces the risk of significant loan losses.
- Recent rallies in mortgage rates have injected renewed optimism into the housing and mortgage sector. This could translate into improved loan origination volumes and profitability for MGIC Investment.
- The company’s ability to maintain solid execution despite sector-wide challenges is recognized. This reflects well on management's operational effectiveness and long-term growth prospects.
- Stable price target increases suggest that valuation remains attractive, particularly given the company's capacity to weather headwinds and deliver on expected performance metrics.
Bearish Takeaways
- Investors remain cautious regarding the broader health of consumer credit, with ongoing concerns about potential deterioration as macroeconomic conditions evolve.
- Elevated interest rates are expected to persist into 2026. This poses challenges to affordability and limits the pace of growth in the mortgage market.
- The initial optimism from the recent rate rally has moderated, suggesting that gains in mortgage market activity may be short-lived or subject to volatility.
- Uncertainty around the consumer finance sector’s outlook as earnings approach could weigh on valuation and short-term investor sentiment.
What's in the News
- The company completed the repurchase of 7,384,256 shares, representing 3.17% of outstanding shares, for $201.47 million under the buyback plan announced on April 24, 2025 (Key Developments).
- The company finished the buyback of 30,258,832 shares, amounting to 12.15% of outstanding shares, for $750 million under the April 25, 2024 repurchase program (Key Developments).
Valuation Changes
- The Fair Value Estimate has risen slightly from $27.33 to $27.67, reflecting modest upside in analyst expectations.
- The Discount Rate has declined marginally from 7.63% to 7.59%, indicating a minor decrease in perceived risk.
- The Revenue Growth projection increased from 2.78% to 3.15%, suggesting mildly improved growth outlooks for the near term.
- The Net Profit Margin estimate edged lower from 47.88% to 47.47%, representing a small decrease in expected profitability.
- The Future P/E ratio has fallen from 9.95x to 9.73x, pointing to a more attractive valuation based on updated earnings forecasts.
Key Takeaways
- Growing demand from younger homebuyers and urbanization trends will drive sustained revenue growth for MGIC's mortgage insurance offerings.
- Solid credit performance, conservative capital management, and ongoing efficiency initiatives will support higher margins, profitability, and shareholder returns.
- Flat core business growth, constrained new originations, high payout ratios, and housing market headwinds signal long-term profitability and capital strength challenges for MGIC.
Catalysts
About MGIC Investment- Through its subsidiaries, provides private mortgage insurance, other mortgage credit risk management solutions, and ancillary services in the United States, the District of Columbia, Puerto Rico, and Guam.
- The ongoing entrance of Millennials and Gen Z into the housing market is expected to sustain demand for mortgage insurance, positioning MGIC for steady policy growth and future revenue expansion when affordability conditions improve or rates moderate.
- Urbanization, new household formation, and persistent pent-up demand for homeownership in the U.S. signal a robust long-term need for mortgage credit and insurance, underpinning resilient premium revenue and supporting revenue growth over time.
- 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.
- Conservative capital management-including ongoing share buybacks and dividend increases-reduces outstanding share count and enhances EPS, directly benefitting shareholder returns and long-term earnings per share growth.
- Strong investment in operational efficiency and technology-driven cost controls, coupled with stable operating expenses, signal potential for margin expansion and greater bottom-line profitability in future periods.
MGIC Investment Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming MGIC Investment's revenue will grow by 2.8% annually over the next 3 years.
- Analysts assume that profit margins will shrink from 62.6% today to 47.9% in 3 years time.
- Analysts expect earnings to reach $633.5 million (and earnings per share of $3.43) by about September 2028, down from $762.6 million today.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 10.0x on those 2028 earnings, up from 8.5x today. This future PE is lower than the current PE for the US Diversified Financial industry at 16.5x.
- Analysts expect the number of shares outstanding to decline by 7.0% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 7.63%, as per the Simply Wall St company report.
MGIC Investment Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- Persistently flat insurance in force and annual persistency suggest limited growth in MGIC's core business, which, if prolonged, could constrain revenue expansion and earnings potential over the long term.
- Management acknowledges that market conditions are currently limiting the company's ability to prudently grow its insurance portfolio, implying that sustained low origination and growth may hinder MGIC's ability to generate new premiums-directly impacting future revenue and net margins.
- Elevated payout ratios (over 100% of net income) and heavy reliance on share repurchases reflect a lack of organic growth opportunities and could reduce the company's financial flexibility, potentially compromising long-term capital strength and future earnings stability.
- Ongoing affordability challenges, elevated interest rates, and slower home sales threaten new homebuyer demand and loan origination volume, which may restrict MGIC's policy growth and put pressure on both revenue and long-term profitability.
- Management expects an increase in delinquency rates as the large 2021 and 2022 insurance vintages age, which could lead to higher claims, elevated loss ratios, and adverse effects on net margins and future earnings.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $27.333 for MGIC Investment based on their expectations of its future earnings growth, profit margins and other risk factors.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.3 billion, earnings will come to $633.5 million, and it would be trading on a PE ratio of 10.0x, assuming you use a discount rate of 7.6%.
- Given the current share price of $28.25, the analyst price target of $27.33 is 3.4% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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