Trade-Ideas: MGIC Investment (MTG) Is Today's

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 ( MTG) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified MGIC Investment 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 $70.3 million.
  • MTG has traded 75,602 shares today.
  • MTG is up 3.9% today.
  • MTG was down 9.5% yesterday.

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More details on MTG:

MGIC Investment Corporation, through its subsidiaries, provides private mortgage insurance and ancillary services to lenders and government sponsored entities in the United States. MTG has a PE ratio of 30.3. Currently there are 4 analysts that rate MGIC Investment a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for MGIC Investment has been 5.4 million shares per day over the past 30 days. MGIC Investment has a market cap of $3.1 billion and is part of the financial sector and insurance industry. The stock has a beta of 3.77 and a short float of 13.6% with 5.16 days to cover. Shares are up 9.5% year-to-date as of the close of trading on Thursday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates MGIC Investment as a hold. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and expanding profit margins. However, as a counter to these strengths, we find that revenues have generally been declining.

Highlights from the ratings report include:
  • MGIC INVESTMENT CORP/WI reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, MGIC INVESTMENT CORP/WI continued to lose money by earning -$0.23 versus -$4.59 in the prior year. This year, the market expects an improvement in earnings ($0.51 versus -$0.23).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Thrifts & Mortgage Finance industry. The net income increased by 182.2% when compared to the same quarter one year prior, rising from -$72.93 million to $59.98 million.
  • 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 on the basis of return on equity, MGIC INVESTMENT CORP/WI has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • MTG, with its decline in revenue, underperformed when compared the industry average of 0.1%. Since the same quarter one year prior, revenues fell by 12.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • Powered by its strong earnings growth of 148.38% and other important driving factors, this stock has surged by 56.61% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, however, we cannot assume that the stock's past performance is going to drive future results. Quite to the contrary, its sharp appreciation over the last year is one of the factors that should prompt investors to seek better opportunities elsewhere.

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