Analysts expect this financial services company to grow at triple-digit rates in 2017.
NMI Holdings (NMIH)
From Cabot Stock of the Week
NMI Holdings (NMIH) is a provider of private mortgage insurance that was started in 2013 to take advantage of the opportunity presented by the collapse of the industry in the wake of the Great Recession, and I think it will do well in 2017 as the housing industry gains strength.
Fundamentally, the company boasts fast-growing revenues (up 142% in the latest quarter), growing profit margins (17.4%) and a still-small size ($35.5 million in revenue in the latest quarter) that enables rapid growth. In fact, analysts are expecting earnings to jump 315% in 2017!
The risk profile of NMI’s clients is extremely low (80% of its borrowers have FICO scores above 720) and none are interest-only loans and none are zero-down payment. As a result, NMI’s loss ratio (ratio of claims that have been paid divided by premiums earned) has hovered just below and above 2% during the past few quarters. And, as interest rates climb in 2017, the company’s portfolio ($686 million portfolio in fixed income at the end of September, with a weighted-average A credit rating) should benefit.
Technically, the stock has been strong since July, climbing from 5 to 10 in December, and just breaking out into the double-digit levels that institutions prefer later in the month. As with any low-priced stock, volatility should be expected, but intelligent buying on dips should pay off very well.
Timothy Lutts, Cabot Stock of the Week, www.cabot.net, 978-745-5532, December 22, 2016