Essent Group (ESNT) versus MGIC Investment (MTG) Critical Review

Essent Group (NYSE: ESNT) and MGIC Investment (NYSE:MTG) are both mid-cap finance companies, but which is the better business? We will contrast the two businesses based on the strength of their profitability, dividends, institutional ownership, earnings, valuation, risk and analyst recommendations.

Risk and Volatility

Essent Group has a beta of 1.2, meaning that its stock price is 20% more volatile than the S&P 500. Comparatively, MGIC Investment has a beta of 1.98, meaning that its stock price is 98% more volatile than the S&P 500.

Valuation and Earnings

This table compares Essent Group and MGIC Investment’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Essent Group $576.51 million 5.92 $379.74 million $3.10 11.22
MGIC Investment $1.07 billion 3.65 $355.76 million $1.36 7.71

Essent Group has higher earnings, but lower revenue than MGIC Investment. MGIC Investment is trading at a lower price-to-earnings ratio than Essent Group, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

89.9% of Essent Group shares are held by institutional investors. Comparatively, 91.4% of MGIC Investment shares are held by institutional investors. 3.0% of Essent Group shares are held by insiders. Comparatively, 1.0% of MGIC Investment shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares Essent Group and MGIC Investment’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Essent Group 68.82% 18.80% 13.49%
MGIC Investment 38.25% 17.43% 9.69%

Analyst Recommendations

This is a breakdown of current ratings and target prices for Essent Group and MGIC Investment, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Essent Group 0 1 9 0 2.90
MGIC Investment 0 3 10 0 2.77

Essent Group currently has a consensus target price of $51.75, indicating a potential upside of 48.84%. MGIC Investment has a consensus target price of $15.94, indicating a potential upside of 51.93%. Given MGIC Investment’s higher possible upside, analysts plainly believe MGIC Investment is more favorable than Essent Group.

Summary

Essent Group beats MGIC Investment on 9 of the 14 factors compared between the two stocks.

Essent Group Company Profile

Essent Group Ltd., through its subsidiaries, provides private mortgage insurance and reinsurance for mortgages secured by residential properties located in the United States. The company also provides information technology maintenance and development services; customer support-related services; and contract underwriting services. It serves originators of residential mortgage loans, such as regulated depository institutions, mortgage banks, credit unions, and other lenders. The company was founded in 2008 and is based in Hamilton, Bermuda.

MGIC Investment Company Profile

MGIC Investment Corporation, through its subsidiaries, provides private mortgage insurance and ancillary services to lenders and government sponsored entities in the United States. The company offers primary mortgage insurance that provides mortgage default protection on individual loans, as well as covers unpaid loan principal, delinquent interest, and various expenses associated with the default and subsequent foreclosure. It also provides contract underwriting services; and other services for the mortgage finance industry, such as analysis of loan originations and portfolios, and mortgage lead generation services, as well as reinsurance arrangements. The company serves originators of residential mortgage loans, including savings institutions, commercial banks, mortgage brokers, credit unions, mortgage bankers, and other lenders. MGIC Investment Corporation was founded in 1957 and is headquartered in Milwaukee, Wisconsin.

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