| Valuation method | Value, $ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 83.94 | 112 |
| Intrinsic value (DCF) | 0.00 | -100 |
| Graham-Dodd Method | 50.28 | 27 |
| Graham Formula | 90.16 | 127 |
NMI Holdings, Inc. (NASDAQ: NMIH) is a leading provider of private mortgage guaranty insurance in the U.S., offering critical risk management solutions to lenders. The company insures high loan-to-value (LTV) residential mortgages, protecting lenders against default while enabling homebuyers to secure financing with lower down payments. Operating in the specialty insurance sector under Financial Services, NMI serves a diverse clientele, including national and regional mortgage banks, credit unions, and non-bank lenders. Since its founding in 2011, NMI has leveraged its underwriting expertise and technology-driven loan review services to carve a niche in the mortgage insurance market. With a disciplined risk management approach and strong capital position, the company is well-positioned to capitalize on housing market trends, regulatory tailwinds, and lender demand for private mortgage insurance (PMI) as an alternative to government-backed options.
NMI Holdings presents a compelling investment case due to its strong underwriting profitability (net income of $360M in latest FY), low beta (0.558), and capital-efficient business model with $393M operating cash flow. The company benefits from housing market fundamentals and private mortgage insurance industry growth as FHA premiums remain elevated. However, risks include sensitivity to interest rate fluctuations impacting mortgage originations and concentration in U.S. residential housing. The zero dividend policy may deter income-focused investors, though this reflects management's focus on capital retention for growth. Valuation appears reasonable at ~4.6x revenue with demonstrated earnings consistency (EPS $4.43 diluted).
NMI Holdings competes in the private mortgage insurance (PMI) sector by differentiating through technology integration and targeted lender relationships. Unlike larger competitors tied to legacy systems, NMI's modern infrastructure allows efficient risk assessment and claims processing. The company focuses on mid-tier and regional lenders rather than competing head-to-head with industry leaders for mega-bank business. This selective approach has resulted in superior loss ratios (35.7% in 2023 vs industry ~40-45%) and combined ratios. NMI's capital-light model (no legacy liabilities) provides flexibility in pricing and product innovation compared to established peers. However, its smaller scale limits brand recognition versus market leaders, and dependence on U.S. housing makes it vulnerable to regional economic downturns. The company's competitive edge lies in its data analytics capabilities for risk selection and responsive service for non-bank lenders - a growing segment in mortgage origination.