Investment Thesis
MGIC demonstrates exceptional operational efficiency with 69.6% operating margins and a fortress balance sheet (0.13x debt/equity, 23.2x interest coverage), but faces significant headwinds with essentially flat revenue growth (+0.5% YoY), declining net income (-3.2% YoY), and an anemic 3.3% ROE that fails to generate adequate returns on substantial equity base. The company is financially stable but fundamentally stagnant.
Strengths
- Exceptional operating margins (69.6%) and net margins (55.6%) indicate strong pricing power and operational efficiency in mortgage insurance
- Conservative capital structure with 0.13x debt/equity ratio and excellent 23.2x interest coverage provides financial fortress and crisis resilience
- Strong free cash flow generation ($76.7M) with 25.8% FCF margin supports dividends and buybacks despite stagnant earnings
Risks
- Revenue growth essentially flat (+0.5% YoY) with declining net income (-3.2% YoY) signals structural headwinds in mortgage insurance demand or market share erosion
- Critically low ROE of 3.3% on $5.0B equity base suggests capital is not being deployed productively; insufficient returns for equity investors
- Mortgage insurance industry exposure to housing market cycles; high margins may compress during downturns or if mortgage origination volume declines
Key Metrics to Watch
- Mortgage insurance premium revenue trend and origination volume trends in housing market
- ROE trajectory and management's capital allocation decisions given current low returns
- Net income growth resumption and revenue stabilization indicators
Financial Metrics
Revenue
297.1M
Net Income
165.3M
EPS (Diluted)
$0.76
Free Cash Flow
76.7M
Total Assets
6.4B
Cash
235.1M
Profitability Ratios
Gross Margin
N/A
Operating Margin
69.6%
Net Margin
55.6%
ROE
3.3%
ROA
2.6%
FCF Margin
25.8%
Balance Sheet & Liquidity
Current Ratio
N/A
Quick Ratio
N/A
Debt/Equity
0.13x
Debt/Assets
21.5%
Interest Coverage
23.24x
Long-term Debt
643.2M
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-06T15:51:14.718159 |
Data as of: 2026-03-31 |
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