Tuesday, Compass Point increased the price target for NMI Holdings (NASDAQ:NMIH) shares to $36.00, up from the previous $33.00, while maintaining a Buy rating on the stock. The adjustment follows NMI Holdings' first-quarter financial performance, which surpassed analyst expectations.
NMI Holdings delivered an adjusted earnings per share (EPS) of $1.08 for the first quarter of 2024, outperforming the forecast of $0.99 and the consensus estimate of $0.98. This result was attributed to the company's lower than expected insurance claims and claims expenses, which came in at $3.7 million compared to the anticipated $11.4 million.
The company also reported a robust return on equity of 18.2% for the quarter. Additionally, the book value per share (BVPS) was calculated at $24.56, while the BVPS excluding accumulated other comprehensive income (AOCI) stood at $26.42.
The firm highlighted NMI Holdings' competitive edge due to its industry-leading low expense base. The company's expense ratio for the first quarter was 21.8%, contributing to its ability to generate superior returns as its insurance in force (IIF) continues to expand, potentially leading to better return on equity (ROE) over time.
The updated price target of $36.00 is based on a 1.0x multiple of Compass Point's forecasted book value per share of $36.44 for the fiscal year 2025. This revision reflects the firm's confidence in NMI Holdings' financial trajectory and operational efficiency.
InvestingPro Insights
Following Compass Point's price target increase for NMI Holdings, real-time data and InvestingPro Tips provide further context for investors considering the stock. NMI Holdings is currently trading at a low P/E ratio of 8.1, which is even more attractive when adjusted for the last twelve months as of Q1 2024, standing at 7.97. This valuation metric is particularly compelling relative to the company's near-term earnings growth potential. Moreover, the firm's significant return over the last week of 8.26% showcases its recent market performance.
InvestingPro Tips also highlight that analysts are optimistic about the company's profitability, with revisions to earnings estimates moving upwards for the upcoming period. Furthermore, the company's liquid assets surpassing short-term obligations indicates a strong liquidity position, which is a reassuring sign for investors concerned about financial stability.
Investors should note that NMI Holdings does not pay a dividend, which could influence the investment decision for income-focused portfolios. For those interested in a deeper analysis, additional InvestingPro Tips are available, offering a comprehensive view of the company's financial health and market performance. With the use of coupon code PRONEWS24, investors can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription to access these insights.
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