Mortgage Guaranty Insurance Corporation
MTG
$28.80
+3.82%
MGIC Investment Corp. is a specialty insurance holding company that provides private mortgage insurance (MI), mortgage credit risk management solutions, and ancillary services to mortgage lenders across all 50 U.S. states and Puerto Rico, with concentrated exposure in California, Florida, Texas, and other high-volume housing markets. As one of the two dominant private mortgage insurers in the United States alongside Arch Capital's RMIC and Essent, MGIC operates as a mature, capital-return-oriented market leader whose earnings are driven by premium revenue from in-force policies and investment income on a large fixed-income portfolio. The current investor narrative is defined by a tug-of-war between an exceptionally profitable, cash-generative core business trading at a single-digit earnings multiple and persistent concerns about credit quality and housing affordability in a higher-for-longer mortgage rate environment, which has suppressed new insurance written and left revenue slightly contracting year over year. With the stock down roughly 3% over the past year and underperforming the S&P 500 by nearly 18 percentage points, the debate centers on whether the recent pullback represents a value opportunity in a disciplined, buyback-heavy insurer or an early signal of deteriorating mortgage credit conditions.…
MTG
Mortgage Guaranty Insurance Corporation
$28.80
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Investment Opinion: Should I buy MTG Today?
We rate MTG a Hold. The stock is a deep-value, capital-return story with a forward PE of 7.80x and a dividend yield of 2.01%, but it faces revenue headwinds and credit cycle uncertainty. The analyst consensus is Hold with an average target of $31.00, implying 15.0% upside, but the recent technical breakdown and relative underperformance suggest limited near-term catalysts.
The supporting evidence includes: 1) a forward PE of 7.80x, which is well below the market and peers; 2) a net margin of 60.8% and ROE of 14.3%, demonstrating exceptional profitability; 3) robust free cash flow of $706.5 million TTM, funding $184.7 million in buybacks and $31.6 million in dividends in Q2 2026 alone; and 4) a debt-to-equity of only 0.126, providing financial flexibility. However, revenue is contracting at 2.91% year-over-year, and earnings are declining, which limits multiple expansion.
The biggest risks are a deterioration in mortgage credit, which could lead to reserve increases and earnings declines, and the potential for the stock to break below its 52-week low of $24.69. The rating would upgrade to Buy if the stock falls below $25 (implying a forward PE below 7x) or if credit metrics show sustained improvement. It would downgrade to Sell if revenue declines accelerate beyond 5% or if delinquency rates rise significantly. At 1.28x book and 9.22x trailing earnings, the stock is fairly valued relative to its history and peers, but offers a compelling dividend and buyback yield for value-oriented investors.
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MTG 12-Month Price Forecast
MTG presents a classic value trap dilemma: it is statistically cheap with a forward PE below 8x and a 2% dividend yield, but revenue is declining and credit risk is elevated. The company's exceptional profitability and fortress balance sheet provide a cushion, but without revenue growth or a credit cycle upturn, the stock may remain range-bound. The recent technical breakdown and relative underperformance suggest that investors are pricing in a bearish scenario. We would upgrade to bullish if credit metrics improve and revenue stabilizes, and downgrade to bearish if delinquency rates rise or the stock breaks below $24.69.
Wall Street consensus
Most Wall Street analysts maintain a constructive view on Mortgage Guaranty Insurance Corporation's 12-month outlook, with a consensus price target around $30.83 and implied upside of +7.1% versus the current price.
Average Target
$30.83
0 analysts
Implied Upside
+7.1%
vs. current price
Analyst Count
—
covering this stock
Price Range
$28 - $35
Analyst target range
Coverage of MGIC is moderate, with five analysts contributing to the consensus. The recommendation distribution is uniformly neutral — the consensus recommendation is "hold" with a recommendation mean of 2.83 (where 1 is strong buy and 5 is strong sell), and the institutional ratings history shows only Market Perform, Sector Perform, Equal Weight, and Neutral actions from Keefe Bruyette & Woods, RBC Capital, Barclays, and UBS over the past year, with no upgrades or downgrades. The average target price of $31.00 implies approximately 15.0% upside from the current price of $26.95, which is a meaningful but not aggressive spread, consistent with a stock that analysts view as fairly valued with limited near-term catalysts.
The target range spans $28.00 to $35.00, a spread of $7.00, or roughly 26% of the current price, indicating moderate rather than high conviction. The low target of $28.00 — still about 3.9% above the current price — implies that even the bear case assumes the stock is modestly undervalued, likely pricing in stable credit, continued buybacks, and no recession. The high target of $35.00, roughly 29.9% above the current price, would require either multiple expansion toward 10–11x forward earnings or a reacceleration in insurance in force, neither of which is visible in the current data. The absence of any Sell ratings and the tight clustering of targets around the average suggest that the analyst community sees MGIC as a stable, cash-returning value stock rather than a growth or turnaround story, and the recent 13.2% one-month decline has not yet triggered any rating changes — a signal that the selloff may be viewed as technical rather than fundamental.
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Bulls vs Bears: MTG Investment Factors
The bear case currently has stronger evidence due to the recent technical breakdown, persistent revenue contraction, and relative underperformance. However, the bull case is supported by deep value metrics, exceptional profitability, and a fortress balance sheet. The most important tension is whether the recent selloff is an overreaction to transient factors or an early signal of deteriorating mortgage credit conditions. If credit remains stable, the stock is significantly undervalued; if credit deteriorates, earnings and the multiple could compress simultaneously.
Bullish
- Deep Value Multiple: MTG trades at a trailing PE of 9.22x and a forward PE of just 7.80x, well below the broader market and many financial peers. This low multiple provides a margin of safety and significant upside if earnings stabilize or the market re-rates the stock.
- Exceptional Profitability: The company generates a net margin of 60.8% and an operating margin of 76.5%, with Q2 2026 net income of $182.1 million on $295.4 million of revenue. These margins are exceptionally high for a financial services firm and reflect the capital-light, fee-like nature of mortgage insurance.
- Aggressive Capital Return: MGIC repurchased $184.7 million of stock in Q2 2026 alone and pays a dividend yielding 2.01% with a low payout ratio of 17.9%. This buyback-driven share count reduction (from 237.97 million to 210.95 million diluted shares year-over-year) has boosted EPS even as net income declined.
- Fortress Balance Sheet: Debt-to-equity is only 0.126 and the debt ratio is 0.099, meaning debt is just 10% of assets. Free cash flow remains robust at $706.5 million TTM, and interest coverage is a comfortable 26.8x, providing ample capacity for continued capital returns.
Bearish
- Revenue Contraction: Q2 2026 revenue declined 2.91% year-over-year to $295.4 million, continuing a multi-quarter trend of sequential stagnation and decline. With mortgage originations depressed by elevated rates, new insurance written is not offsetting the runoff of older policies.
- Earnings Deterioration: Net income fell 5.4% year-over-year in Q2 2026 to $182.1 million, and EPS growth is entirely dependent on buybacks. If credit conditions worsen, reserve strengthening could accelerate the earnings decline and pressure the capital return program.
- Technical Breakdown: The stock plunged 17.9% from $31.47 on September 3 to $25.84 on September 30, and is down 13.18% over the past month versus a 0.59% gain for SPY. This sharp underperformance suggests a discrete negative catalyst and lingering selling pressure.
- Relative Underperformance: MTG has underperformed the S&P 500 by 17.89 percentage points over the past year and by 20.41 percentage points year-to-date. This persistent weakness indicates that investors are concerned about late-cycle credit risk and housing affordability.
MTG Technical Analysis
MTG is in a broad range-bound consolidation with a distinctly negative intermediate tilt, having declined 2.88% over the trailing twelve months while the S&P 500 gained 15.01%, producing a relative strength deficit of -17.89 percentage points. At the current price of $26.95, the stock sits at roughly 31% of its 52-week range of $24.69 to $31.89, meaning it is trading much closer to the bottom of its annual band than the top. This positioning is characteristic of a stock that has lost momentum rather than one breaking out to new highs, and the failure to hold the upper half of the range suggests sellers remain in control of the tape. The 52-week low of $24.69 is only about 8.4% below the current price, so the margin of safety to the annual floor is thin, while the distance to the 52-week high of $31.89 represents approximately 18.3% of upside required merely to reclaim the top of the range.
Short-term momentum has deteriorated sharply and is diverging negatively from the already-weak longer-term trend. The stock is down 13.18% over the past month versus a 0.59% gain for SPY, a relative strength reading of -13.77 percentage points that marks a violent decoupling from the market. Over three months, MTG is down 4.53% against SPY's 3.34% gain, and the six-month change of +1.62% versus SPY's +17.35% confirms that the underperformance is not a one-month anomaly but a persistent pattern. The most recent price action is particularly telling: after trading near $31.47 on September 3, the stock collapsed to $25.84 on September 30 — a roughly 17.9% peak-to-trough drawdown — before a modest two-day bounce to $26.95, suggesting the selloff was driven by a discrete catalyst rather than gradual drift, and that the bounce is so far unconvincing.
Key technical levels are now clearly defined by the recent breakdown. Immediate support sits at the 52-week low of $24.69, and a decisive break below that level would confirm a new downtrend and likely open the door to further capitulation given the stock's beta of 0.645, which implies roughly 35% less volatility than the broader market — a defensive characteristic that makes the recent 17.9% drawdown all the more notable. Resistance is layered: the first hurdle is the $28.50–$29.00 zone that marked the pre-breakdown consolidation, followed by the 52-week high of $31.89. A reclaim of $29 would signal that the September selloff was an overreaction, while a sustained break below $24.69 would validate the bear case and likely force momentum-oriented holders to exit. The low beta argues for smaller position-sizing adjustments than a high-beta name would require, but it does not insulate the stock from idiosyncratic credit or earnings shocks.
Beta
0.67
0.67x market volatility
Max Drawdown
-17.9%
Largest decline past year
52-Week Range
$25-$32
Price range past year
Annual Return
+5.0%
Cumulative gain past year
| Period | MTG Return | S&P 500 |
|---|---|---|
| 1m | -1.7% | -1.0% |
| 3m | -2.9% | +2.9% |
| 6m | +0.6% | +6.5% |
| 1y | +5.0% | +13.1% |
| ytd | -1.2% | +11.4% |
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MTG Fundamental Analysis
MGIC's revenue trajectory is mildly contracting, with Q2 2026 revenue of $295.4 million representing a 2.91% year-over-year decline from the $304.2 million reported in Q2 2025. The multi-quarter trend shows a steady erosion: quarterly revenue has fallen from $306.6 million in Q3 2024 to $301.4 million in Q4 2024, $306.2 million in Q1 2025, $304.2 million in Q2 2025, $304.5 million in Q3 2025, $298.7 million in Q4 2025, $297.1 million in Q1 2026, and now $295.4 million in Q2 2026 — a clear pattern of sequential stagnation and modest decline. This reflects the structural reality of a mortgage insurer with a large in-force book: premium revenue is amortized over the life of policies, and with mortgage originations depressed by elevated rates, new insurance written is not sufficient to offset the runoff of older, higher-priced policies. The investment case therefore hinges less on growth and more on the durability of the existing book and the company's ability to return capital, which management is doing aggressively.
Profitability remains exceptional for a financial services company. Q2 2026 net income was $182.1 million on $295.4 million of revenue, a net margin of 61.7%, while the gross margin stood at 95.8% and the operating margin at 80.9%. These are extraordinarily high margins that reflect the capital-light, fee-like nature of mortgage insurance once the book is seasoned and losses are contained. However, the trend warrants attention: net income has drifted from $192.5 million in Q2 2025 to $182.1 million in Q2 2026, a 5.4% decline, and diluted EPS has moved from $0.81 to $0.86 — actually higher, because share count has fallen from 237.97 million diluted shares to 210.95 million due to relentless buybacks. The combination of declining absolute profit but rising per-share profit is the signature of a mature company shrinking its way to higher per-share value, and it explains why the stock's PE ratio remains in the single digits despite the revenue headwind.
The balance sheet is conservatively positioned with a debt-to-equity ratio of just 0.126 and a debt ratio of 0.099, meaning debt is only about 10% of assets. Free cash flow remains robust at $706.5 million on a trailing twelve-month basis, and Q2 2026 alone generated $184.5 million of free cash flow against $184.96 million of operating cash flow, a conversion rate above 99%. The company returned substantial capital in Q2 2026, paying $31.6 million in dividends and repurchasing $184.7 million of stock, while still ending the quarter with $215.1 million in cash. ROE of 14.34% and ROA of 8.8% are healthy for an insurer, and the interest coverage ratio of roughly 26.8x provides a wide cushion. The primary financial risk is not solvency but rather the possibility of a credit cycle downturn that would force reserve strengthening and erode the capital base that funds buybacks.
Quarterly Revenue
$295388000.0B
2026-06
Revenue YoY Growth
-2.9%
YoY Comparison
Gross Margin
95.8%
Latest Quarter
Free Cash Flow
$706480000.0B
Last 12 Months
Revenue & Net Income Trends (2 Years)
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Valuation Analysis: Is MTG Overvalued?
Because MGIC is solidly profitable — Q2 2026 net income of $182.1 million and trailing EPS of $0.11 on a per-share basis with a net margin of 60.8% — the PE ratio is the appropriate primary valuation metric. The stock trades at a trailing PE of 9.22x and a forward PE of 7.80x, with the gap between the two implying that the market expects earnings to grow modestly over the next twelve months, consistent with the analyst consensus EPS estimate of $3.34. A forward PE below 8x is unusually low in absolute terms and reflects the market's skepticism about the sustainability of mortgage insurer earnings late in the credit cycle. The PEG ratio of 1.08 suggests the stock is roughly fairly valued relative to its expected growth rate, though the low growth rate itself is the constraint.
Relative to the broader financial services and specialty insurance sector, MGIC screens as a deep-value name. The price-to-book ratio of 1.28x is modest for a company earning a 14.3% ROE, and the price-to-sales ratio of 5.43x and EV/EBITDA of 7.08x are low in absolute terms, though the PS ratio is elevated relative to the company's own history because revenue is contracting while the market cap has been supported by buybacks. The dividend yield of 2.01% with a payout ratio of just 17.9% signals substantial capacity for continued capital return. Compared with peers such as Essent and Arch Capital, which often trade at higher book multiples, MGIC's discount appears to reflect its larger legacy book and greater sensitivity to credit conditions rather than any inferior underwriting discipline.
Historically, MGIC's valuation has compressed. The PE ratio has ranged from roughly 5.0x in late 2022 to 9.7x at the end of 2025, and the current 9.22x sits near the upper end of that multi-year band even as the stock price has fallen — a function of earnings declining faster than the share price. The price-to-book ratio of 1.28x is above the 0.82x–0.96x range seen in 2022–2023 but below the 1.28x–1.29x levels of late 2025. This suggests the market is no longer pricing MGIC as a deep-cyclical bargain but also is not assigning it a premium multiple, leaving the stock in a valuation no-man's-land where a credit deterioration would compress earnings and the multiple simultaneously.
PE
9.2x
Latest Quarter
vs. Historical
High-End
5-Year PE Range 4x~10x
vs. Industry Avg
N/A
Industry PE ~N/A*
EV/EBITDA
7.1x
Enterprise Value Multiple
Investment Risk Disclosure
Financial and operational risks are moderate but centered on credit quality. MGIC's revenue is contracting, with Q2 2026 revenue down 2.91% year-over-year to $295.4 million, and net income declined 5.4% to $182.1 million. The company's earnings are highly sensitive to mortgage defaults; a rise in delinquencies would force reserve strengthening, eroding the capital base that funds buybacks. While the balance sheet is conservative with a debt-to-equity of 0.126 and interest coverage of 26.8x, the primary risk is not solvency but the potential for a credit cycle downturn that could sharply reduce profitability and halt capital returns.
Market and competitive risks include valuation compression and sector rotation. MTG trades at a forward PE of 7.80x, which is low but could remain depressed if investors fear late-cycle credit risk. The stock's beta of 0.645 indicates lower volatility than the market, but it has still suffered a 17.9% drawdown in a single month, highlighting idiosyncratic risk. Competitive pressures from peers like Essent and Arch Capital, which often trade at higher book multiples, could limit multiple expansion. Additionally, elevated mortgage rates and housing affordability issues continue to suppress new insurance written, a trend that may persist if the Fed keeps rates higher for longer.
Worst-case scenario: A severe recession triggers a spike in mortgage delinquencies, forcing MGIC to significantly increase reserves. This would reduce net income, potentially eliminate buybacks, and compress the valuation multiple. The stock could fall to its 52-week low of $24.69, representing an 8.4% decline from the current price of $26.95. In a more extreme scenario, if credit losses exceed expectations, the stock could test the 2022-2023 lows, implying a downside of 20-30% from current levels. The analyst low target of $28.00 is above the current price, but in a bear case, analysts would likely revise targets downward.
FAQ
The key risks include: 1) Credit risk: a recession could trigger mortgage defaults, forcing reserve increases and reducing net income, which fell 5.4% year-over-year in Q2 2026. 2) Revenue risk: revenue is contracting at 2.91% annually due to lower new insurance written, and this trend may persist if mortgage rates remain high. 3) Valuation risk: the stock trades at 1.28x book, and if earnings decline, the multiple could compress further. 4) Market risk: the stock has underperformed the S&P 500 by 17.89 percentage points over the past year, and a break below $24.69 could trigger further selling. These risks are ranked from most to least severe, with credit risk being the primary concern.
Our 12-month forecast has three scenarios: bull case (25% probability) with a target range of $31-$35, assuming stable credit and multiple expansion; base case (55% probability) with a target range of $28-$31, assuming continued revenue decline but stable profitability; and bear case (20% probability) with a target range of $24.69-$28, assuming a recession and credit deterioration. The base case is most likely, hinging on no severe credit downturn and continued buybacks. The analyst average target of $31.00 aligns with our base case, implying 15% upside from the current price of $26.95.
MTG appears undervalued on absolute metrics, trading at a trailing PE of 9.22x and a forward PE of 7.80x, well below the broader market. The price-to-book ratio of 1.28x is modest for a company with a 14.3% ROE, and the PEG ratio of 1.08 suggests fair value relative to growth. However, the PE is near the upper end of its historical range of 5.0x to 9.7x, and the price-to-book is above the 0.82x-0.96x seen in 2022-2023. The market is pricing in concerns about credit quality and revenue contraction, implying that further multiple expansion requires either earnings stabilization or a credit cycle upturn.
MTG is a good buy for value-oriented investors seeking income and capital returns, but it carries significant credit cycle risk. The stock trades at a forward PE of 7.80x and offers a 2.01% dividend yield, with analysts' average target of $31.00 implying 15% upside. However, revenue is declining at 2.91% year-over-year, and the recent 13.18% one-month drop highlights vulnerability. The biggest downside risk is a break below the 52-week low of $24.69, which would represent an 8.4% loss from current levels. For those with a long-term horizon and tolerance for cyclicality, the risk/reward is favorable, but near-term catalysts are lacking.
MTG is more suitable for long-term investment due to its cyclical nature and dependence on credit conditions. The stock has a beta of 0.645, indicating lower volatility than the market, but it has experienced a 17.9% drawdown in a single month, highlighting idiosyncratic risk. The dividend yield of 2.01% and consistent buybacks provide a return for patient investors, but earnings visibility is limited by the credit cycle. Short-term trading is risky given the recent technical breakdown and lack of near-term catalysts. A minimum holding period of 2-3 years is recommended to ride out credit cycles and benefit from capital returns.