MGIC Investment Corporation (MTG) Shows Signs Of Being Water-Logged And Getting Wetter

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified MGIC Investment Corporation ( MTG) as a "water-logged and getting wetter" (weak stocks crossing below support with today's range greater than 200%) candidate. In addition to specific proprietary factors, Trade-Ideas identified MGIC Investment Corporation as such a stock due to the following factors:

  • MTG has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $60.3 million.
  • MTG has traded 2.5 million shares today.
  • MTG traded in a range 314.6% of the normal price range with a price range of $0.70.
  • MTG traded below its daily resistance level (quality: 8 days, meaning that the stock is crossing a resistance level set by the last 8 calendar days. The resistance price is defined by the Price - $0.01 at the time of the signal).

Stocks matching the 'Water-Logged and Getting Wetter' criteria are worthwhile stocks to watch for a variety of factors including historical back testing and volatility. Trade-Ideas targets these opportunities because the stock is exhibiting an unusual behavior while displaying negative price action. In this case, the stock crossed an important inflection point; namely, "support" while at the same time the range of the stock's movement in price is twice its normal size. This large range foreshadows a possible continuation as the stock moves lower.

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More details on MTG:

MGIC Investment Corporation, through its subsidiaries, provides mortgage insurance to lenders and government sponsored entities in the United States. Currently there are 3 analysts that rate MGIC Investment Corporation a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for MGIC Investment Corporation has been 5.8 million shares per day over the past 30 days. MGIC Investment has a market cap of $3.0 billion and is part of the financial sector and insurance industry. The stock has a beta of 3.93 and a short float of 10.9% with 5.29 days to cover. Shares are up 7.6% year-to-date as of the close of trading on Wednesday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates MGIC Investment Corporation as a sell. Among the areas we feel are negative, one of the most important has been poor profit margins.

Highlights from the ratings report include:
  • The gross profit margin for MGIC INVESTMENT CORP/WI is rather low; currently it is at 18.15%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, MTG's net profit margin of 4.76% is significantly lower than the industry average.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Thrifts & Mortgage Finance industry and the overall market, MGIC INVESTMENT CORP/WI's return on equity significantly trails that of both the industry average and the S&P 500.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Thrifts & Mortgage Finance industry average, but is greater than that of the S&P 500. The net income increased by 104.9% when compared to the same quarter one year prior, rising from -$246.94 million to $12.11 million.
  • The revenue fell significantly faster than the industry average of 106.4%. Since the same quarter one year prior, revenues fell by 16.9%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • MGIC INVESTMENT CORP/WI reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, MGIC INVESTMENT CORP/WI reported poor results of -$4.59 versus -$2.41 in the prior year. This year, the market expects an improvement in earnings (-$0.27 versus -$4.59).

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.
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