MGIC Investment Corp Stock Upgraded (MTG)

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.

NEW YORK ( TheStreet) -- MGIC Investment (NYSE: MTG) has been upgraded by TheStreet Ratings from sell to 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 notable return on equity. However, as a counter to these strengths, we find that the company's profit margins have been poor overall.

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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 ($0.47 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 267.9% when compared to the same quarter one year prior, rising from $12.38 million to $45.52 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.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. We feel that the combination of its price rise over the last year and its current price-to-earnings ratio relative to its industry tend to reduce its upside potential.
  • The gross profit margin for MGIC INVESTMENT CORP/WI is currently lower than what is desirable, coming in at 32.81%. Despite the low profit margin, it has increased significantly from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 19.68% trails the industry average.

MGIC Investment Corporation, through its subsidiaries, provides private mortgage insurance and ancillary services to lenders and government sponsored entities in the United States. MGIC Investment has a market cap of $2.68 billion and is part of the financial sector and insurance industry. Shares are down 5.8% year to date as of the close of trading on Monday.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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