NMI Holdings, Inc. (NMIH): what the price requires
At today's price, NMI Holdings, Inc. (NMIH) is priced for 10.7% return on equity. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.
Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/NMIH
Headline
| Field | Value |
|---|---|
| Ticker | NMIH |
| Company | NMI Holdings, Inc. |
| Current price | $41.68/sh |
What The Price Requires (Inversion)
The assumption today's price embeds, recovered by inverting the valuation.
| Field | Value |
|---|---|
| Inversion basis | financials |
| Return on equity needed | 10.7% |
| Return on equity now | 15.0% |
| ROE gap | -4.3pp |
| Price-to-book | 1.20x |
Solve inputs: computed at a 9.5% cost of equity with 4% terminal growth over a 5-year stage, on common book equity (FY2026); each 1pp of cost of equity moves the implied ROE ~1.2pp.
How unusual the bet is: within-range
| Reference | Value |
|---|---|
| vs own history | +0.25σ |
| cohort percentile (of 80 peers) | 24 |
| sustained it ~10 years at this level | 74% |
| implied end-window share | 0% |
Valuation X-Ray
The price is supported by asset-based and earnings-power and relative-multiple value. A value/asset-supported name, not a pure growth bet.
How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.
| Family | Median price/FV | Models | Reads |
|---|---|---|---|
| Asset | 0.68x | 3 | justifies |
| Earnings | 0.63x | 2 | justifies |
| Relative | 0.71x | 3 | justifies |
| Growth | 1.26x | 1 | expensive |
Families that justify the price: Asset, Earnings, Relative
The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.3%); the inversion above states its own rate.
Per-Model Detail (n=9)
| Model | Family | FV | Price/FV | Applicable | Methodology |
|---|---|---|---|---|---|
| DCF Perpetual Growth | Growth | — | — | no | — |
| Bank Fair Value (P/TBV) | — | $77.20 | 0.54x | yes | TBVPS $34.00 × 2.27x (ROE (TTM) 14.7% / CoE 9.3%, g=5.0% (sustainable: 65% retention × ROE, 5% cap; not the terminal-growth assumption)) |
| Relative Valuation | Relative | $58.74 | 0.71x | yes | P/E 11x (static sector reference · 2026-04), scenarios: 9.2x / 11.0x / 12.8x (bear / base = reference held flat / bull), EV/EBITDA 10x |
| Simple DDM | Growth | — | — | no | — |
| Two-Stage DDM | Growth | — | — | no | — |
| Simple Excess Return | Asset | $53.85 | 0.77x | yes | BV/sh $34.00, ROE (TTM) 14.7%, ke 9.3% |
| Two-Stage Excess Return | Asset | $67.00 | 0.62x | yes | 5yr excess ROE then converge to ke=9.3% |
| Discounted Future Market Cap | Growth | $33.01 | 1.26x | yes | Rev $0.7B, growth 7% (input: historical growth; tapered), Terminal P/S: 3.8x / 4.5x / 5.2x (bear / base = today's held flat / bull, cap 8x) |
| Peter Lynch Fair Value | Relative | $59.04 | 0.71x | yes | EPS $4.92, growth 7% (input: historical EPS growth), PEG=1.28 (Fair) |
| Margin Trajectory | Growth | — | — | no | — |
| Earnings Power Value | Earnings | — | — | no | — |
| Residual Income | Asset | — | — | no | — |
| Graham Number | Asset | $61.35 | 0.68x | yes | √(22.5 × EPS $4.92 × BVPS $34.00) — Graham's conservative floor |
| EV/EBITDA Relative | Relative | — | — | no | — |
| FCF Yield | Earnings | — | — | no | — |
| SBC-Adj FCF Yield | Earnings | — | — | no | — |
| Ben Graham Formula | Earnings | $89.17 | 0.47x | yes | EPS $4.92 × (8.5 + 2×6.6%) × (4.4 / 5.3%) |
| ROIC-Justified P/B | Asset | — | — | no | — |
| P/Sales Sector | Relative | — | — | no | — |
| PEG Fair Value | Relative | $48.43 | 0.86x | yes | EPS $4.92 × (PEG 1.5 × growth 6.6% (input: historical EPS growth)) → PE 9.8x |
| Earnings Yield | Earnings | $53.19 | 0.78x | yes | EPS $4.92 / required return 9.3% (Rf 4.3% + ERP 5.0%) |
| Funds From Operations Multiple | Relative | — | — | no | — |
| Clinical Phase NPV | Growth | — | — | no | — |
| Merton | Asset | — | — | no | — |
| V5 Mechanical | — | — | — | no | — |
Solvency
| Field | Value |
|---|---|
| Share count CAGR (buyback) | -3.0% |
Deposit/float-funded balance sheet: debt is funding, not corporate leverage, and GAAP operating cash flow follows loan flows. Net-debt, interest-coverage, and cash-burn lenses do not apply. The solvency frame for a financial is regulatory capital and payout capacity (CET1, stress buffer, dividends plus buybacks against earnings).
Bullet Takeaways
- NMI Holdings sells private mortgage insurance, protecting lenders when borrowers with small down payments default, and it has built that into a $222.3 billion book of insurance in force earning a 15% return on equity.
- The defining risk is the housing and employment cycle: mortgage-insurance losses are low in good times but spike in a downturn, and the company's filing is explicit that rising unemployment increases borrower defaults.
- The capital position is the cushion: the company holds about $1.5 billion in excess available assets above its regulatory requirement and is buying back stock at a price near book value.
Bull Case
NMI Holdings is a mature, well-capitalized insurer with a simple, profitable model, and reading it correctly starts with what the product is. When a homebuyer puts down less than 20%, the lender requires private mortgage insurance to cover the loss if that borrower defaults. NMI collects a premium for taking that risk, invests the float, and pays claims only when defaults occur. In a healthy housing market that is a high-return business, and the numbers show it: the company earned an annualized adjusted return on equity of 15.2% in the first quarter and grew book value per share 16.6% year over year to $34.57. A 15% return on a growing book is the engine of value for any insurer.
The book of business is large, sticky, and performing well. Insurance in force rose to $222.3 billion, supported by $12.3 billion of new insurance written and an annual persistency rate of 82.2%, meaning most policies stay on the books year to year. Persistency matters because each retained policy keeps earning premium without new acquisition cost; the company's filing notes that for monthly policies the premium is earned over the life of the loan, so a high-persistency book is a long, recurring revenue stream. Credit is clean, with a primary default rate of just 1.17% across nearly 685,000 policies, the sign of a book underwritten in a disciplined era.
The capital and the valuation are the third leg. NMI holds roughly $1.5 billion in excess available assets above its regulatory capital requirement, a substantial buffer against losses, and it has been shrinking its share count by about 3% a year through buybacks. Repurchasing stock near book value is accretive for a profitable insurer, because it retires shares at close to their underlying net worth and concentrates the future returns on fewer shares. For a buyer at today's price, paying about 1.1 times book in the lower half of the peer group, the bull case is a disciplined insurer earning a 15% return, sitting on excess capital, and returning it to holders at an attractive price.
Bear Case
The single variable with the most leverage over a mortgage insurer is the one it cannot control: the economy. Private mortgage insurance is a business that looks wonderfully profitable right up until a recession, when defaults rise across the whole book at once. The company's own filing states the mechanism plainly: "Rising unemployment rates and deterioration in economic conditions for extended periods of time, across the U.S. or in specific regional economies, generally increases the likelihood of borrower defaults." The current default rate of 1.17% reflects a strong job market and rising home prices. If unemployment climbs or home prices fall, that rate moves higher, and because the company insures against exactly that event, its losses rise precisely when its customers can least afford to pay. The 15% return on equity is a good-times number.
The recent quarter already showed margin pressure beneath the headline beat. The operating margin contracted to 72% from nearly 80% a year earlier, and the return on equity, while still strong at 15.2%, fell about 290 basis points year over year. That compression is the early signal that the most favorable part of the cycle may be behind the company, as competition and rising claim costs erode the spread. The implied return baked into the price, about 10%, is below the 15% the company has recently earned, which tells you the market itself expects the return to fade. The bear case is that the fade could be steeper than the price assumes if the housing cycle turns.
The structural fragility is that the entire portfolio is correlated to one risk. Unlike a diversified lender, NMI's losses are concentrated in housing-market stress, and a housing downturn hits every policy in the book simultaneously. The $1.5 billion capital buffer is meant for exactly this, and it is substantial, but a severe and prolonged downturn is the scenario that tests whether any mortgage insurer's reserves are sufficient. The static valuation methods read the price as cheap relative to assets and earnings power, which is the value-supported read in a benign environment, but those methods cannot price the tail risk of a credit cycle. The bear case is not that NMI is poorly run; it is well run. It is that the price reflects today's clean credit, and the business is built to absorb a shock it has not recently faced.
Valuation
An insurer is worth the return it earns on its capital, so the price is read off book value rather than an operating multiple. At today's price the market pays about 1.1 times book and assumes NMI sustains a return on equity around 10%. For reference, it has recently been earning about 15%, so the price embeds a meaningful fade from the current level. The framework reads the assumption as within range, and the assumed return sits within the company's own record. Notably, the price is in the lower half of its peer group's price-to-book, so NMI is valued more cautiously than its mortgage-insurance peers, which is either an opportunity or a market judgment that its returns are more cyclical.
The standard valuation methods read the price as cheap, and that read deserves the cyclical caveat that always accompanies financials. The asset-based, earnings-power, and peer-multiple methods all place the price below their estimates, supporting a value interpretation, while only the growth method sits modestly above. The pattern says the price is supported by the company's assets and current earnings power, not stretched on a growth bet. The catch is that these methods anchor on today's clean credit and strong return; they cannot capture what happens to a mortgage insurer's earnings in a housing downturn, when losses rise across the entire book. The cheap-looking multiple is cheap partly because the market discounts the cyclicality.
For an insurer, solvency is about regulatory capital and the buffer against a loss event, not corporate leverage. NMI holds roughly $1.5 billion in excess available assets above its requirement, a substantial cushion, and its book value grew 16.6% year over year, so the capital base is strengthening. The buyback at a price near book value adds to per-share value for continuing holders. The decisive variable is the credit cycle: if the housing market and employment stay healthy, the company keeps earning a return well above what the price assumes, and the value-supported read is right; if the cycle turns, defaults rise across a correlated book, the return compresses, and the price that looked cheap was pricing the cyclicality the static methods cannot see.
Catalysts
Credit performance is the catalyst that matters most for a mortgage insurer, because it is the difference between a profitable book and a loss-making one. In the first quarter the primary default rate held at a low 1.17% across nearly 685,000 policies, reflecting a strong labor market and rising home prices. Any movement in that default rate, driven by unemployment or home-price trends, is the single most important signal to watch, because it flows directly into claims and earnings.
The portfolio and return metrics set the operating cadence. Insurance in force rose to $222.3 billion on $12.3 billion of new insurance written and persistency of 82.2%, while the company earned an adjusted return on equity of 15.2%, down about 290 basis points year over year. Whether new insurance written keeps pace and whether the return on equity stabilizes or continues to compress are the quarterly threads that determine the trajectory.
Capital return is the catalyst holders can count on in the near term. The company holds roughly $1.5 billion in excess available assets and has been buying back stock near book value, shrinking the share count and concentrating returns. The pace of those buybacks, and any change in the capital position as the housing cycle evolves, are the catalysts that determine how much of the company's strong returns reach continuing shareholders.
Peer Cohorts (Per Segment, With Filing Citations)
Mortgage Insurance (reported)
- ESNT (ESSENT GROUP LTD.)
- (no filing in the citation store)
- MTG (MGIC Investment Corp)
- (no filing in the citation store)
- RDN (RADIAN GROUP INC)
- (no filing in the citation store)
- STC (STEWART INFORMATION SERVICES CORP)
- (no filing in the citation store)
- RLI (RLI Corp)
- (no filing in the citation store)
- PLMR (Palomar Holdings, Inc.)
- (no filing in the citation store)
- KNSL (KINSALE CAPITAL GROUP, INC.)
- (no filing in the citation store)
- HCI (HCI Group, Inc.)
- (no filing in the citation store)
Methodology Note
- Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
- Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
- Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
- Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.
Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.
Sources
NMI Holdings Q1 2026 results · company 10-K, fiscal 2024