Introducing NMI Holdings (NASDAQ:NMIH), The Stock That Soared 321% In The Last Five Years

For many, the main point of investing in the stock market is to achieve spectacular returns. And highest quality companies can see their share prices grow by huge amounts. To wit, the NMI Holdings, Inc. (NASDAQ:NMIH) share price has soared 321% over five years. If that doesn't get you thinking about long term investing, we don't know what will. And in the last week the share price has popped 5.1%.

See our latest analysis for NMI Holdings

To paraphrase Benjamin Graham: Over the short term the market is a voting machine, but over the long term it's a weighing machine. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS).

During the last half decade, NMI Holdings became profitable. Sometimes, the start of profitability is a major inflection point that can signal fast earnings growth to come, which in turn justifies very strong share price gains. Given that the company made a profit three years ago, but not five years ago, it is worth looking at the share price returns over the last three years, too. Indeed, the NMI Holdings share price has gained 31% in three years. In the same period, EPS is up 19% per year. This EPS growth is higher than the 9% average annual increase in the share price over the same three years. Therefore, it seems the market has moderated its expectations for growth, somewhat. This unenthusiastic sentiment is reflected in the stock's reasonably modest P/E ratio of 10.03.

The image below shows how EPS has tracked over time (if you click on the image you can see greater detail).

Dive deeper into NMI Holdings' key metrics by checking this interactive graph of NMI Holdings's earnings, revenue and cash flow.

A Different Perspective

NMI Holdings shareholders are down 26% for the year, but the market itself is up 24%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. On the bright side, long term shareholders have made money, with a gain of 33% per year over half a decade. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. I find it very interesting to look at share price over the long term as a proxy for business performance. But to truly gain insight, we need to consider other information, too. For instance, we've identified 3 warning signs for NMI Holdings that you should be aware of.

But note: NMI Holdings may not be the best stock to buy. So take a peek at this free list of interesting companies with past earnings growth (and further growth forecast).

Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.

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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. 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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