NMIH

We rate NMI Holdings, Inc. (NMIH) as a Reduce with a composite score of 40.6/100 at a current price of $39.16. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in stability (65th percentile) and value (49th percentile), which together account for the majority of the composite score. Offsetting weakness in quality (26th percentile) and investment (32th percentile) tempers our overall conviction. We assign a Narrow Moat rating (57/100), Low uncertainty, and Standard capital allocation.

Key items to watch: quarterly earnings execution and sector-level competitive dynamics. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

NMI Holdings, Inc. holds a top-quartile position (#0 of 50) within the Finance, Insurance, And Real Estate sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 40.6/100 places it at rank #3463 in our full 7,333-stock universe. At $3.0B in market capitalization, NMI Holdings, Inc. is a mid-cap player in the Finance, Insurance, And Real Estate space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 10%, though momentum at the 45th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 0% (-76.5pp vs sector) narrow to operating margins of 72% (+55.0pp vs sector) and net margins of 56.0%, yielding a gross-to-net conversion rate of N/A%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $39.16, NMI Holdings, Inc. is trading near fair value based on current fundamentals. Our value factor score of 49/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 7.7x (a 36% discount to the sector median of 11.9x), EV/EBITDA of 6.0x (discounted to peers), P/B of 1.1x, P/S of 4.3x. The below-sector P/E suggests possible undervaluation or the market pricing in near-term headwinds.

We assign a Low uncertainty rating to NMI Holdings, Inc.. The company exhibits strong financial stability with a beta of 0.60, conservative leverage (48% D/E), and a stability factor in the 65th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: weak quality scores (26th percentile); low beta of 0.60 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 65th percentile and quality factor at the 26th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: above-average stability (65th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate NMI Holdings, Inc.'s capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 14.9%, and the balance sheet is managed within acceptable parameters (D/E: 48%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; NMI Holdings, Inc. falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. Absent a dividend, the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, NMI Holdings, Inc. receives a Reduce rating with a composite score of 40.6/100 (rank #3463 of 7,333). Our quantitative framework assigns a Narrow Moat (57/100, trend: stable), Low uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 43/100.

Our analysis does not support a constructive view on NMI Holdings, Inc. at this time. The combination of the current quantitative profile, low uncertainty, and standard capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.