Is NMI Holdings, Inc. (NASDAQ:NMIH) Undervalued After Accounting For Its Future Growth?

NMI Holdings, Inc. (NASDAQ:NMIH) is considered a high growth stock. However its last closing price of $27.51 left investors wondering whether this growth has already been factored into the share price. Let’s look into this by assessing NMIH’s expected growth over the next few years.

View our latest analysis for NMI Holdings

What can we expect from NMIH in the future?

The excitement around NMI Holdings’s growth potential is not unfounded. The consensus forecast from 8 analysts is extremely positive with earnings per share estimated to rise from today’s level of $1.986 to $3.447 over the next three years. This indicates an estimated earnings growth rate of 24% per year, on average, which signals a market-beating outlook in the upcoming years.

Is NMIH’s share price justified by its earnings growth?

NMI Holdings is available at a price-to-earnings ratio of 13.85x, showing us it is undervalued relative to the current US market average of 17.5x , and undervalued based on its latest annual earnings update compared to the Mortgage average of 13.92x .

NasdaqGM:NMIH Price Estimation Relative to Market, September 9th 2019
NasdaqGM:NMIH Price Estimation Relative to Market, September 9th 2019

NMI Holdings’s price-to-earnings ratio stands at 13.85x, which is low, relative to the industry average. This already suggests that the stock could be undervalued. But, since NMI Holdings is a high-growth stock, we must also account for its earnings growth by using calculation called the PEG ratio. A PE ratio of 13.85x and expected year-on-year earnings growth of 24% give NMI Holdings a very low PEG ratio of 0.57x. So, when we include the growth factor in our analysis, NMI Holdings appears relatively cheap , based on fundamental analysis.

What this means for you:

NMIH’s current undervaluation could signal a potential buying opportunity to increase your exposure to the stock, or it you’re a potential investor, now may be the right time to buy. However, basing your investment decision off one metric alone is certainly not sufficient. There are many things I have not taken into account in this article and the PEG ratio is very one-dimensional. If you have not done so already, I highly recommend you to complete your research by taking a look at the following:

  1. Financial Health: Are NMIH’s operations financially sustainable? Balance sheets can be hard to analyze, which is why we’ve done it for you. Check out our financial health checks here.
  2. Past Track Record: Has NMIH been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of NMIH’s historicals for more clarity.
  3. Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.