Barclays Capital analyst Mark DeVries initiated coverage of NMI Holdings Inc. with an "overweight" rating, writing that the stock is a "compelling" investment given its significant growth prospects.
He expects the company to surpass its peers in insurance-in-force and earnings growth by expanding market share in the private mortgage insurance space and generating significant operating leverage.
DeVries wrote that the company has an approximately $10 billion incremental new insurance written opportunity with lenders where it currently has no active relationship. This, combined with likely favorable industry trends, could propel "outsized" growth in insurance-in-force, earned premiums and earnings over the next decade.
The company's significant leverage will also carry its expense ratio toward industry peers and support return on equity.
DeVries noted that NMI's portfolio consists mostly of postcrisis policies, leading to a much lower delinquency rate compared to peers.
He introduced a price target of $28, and his EPS estimates are $1.59 for 2018 and $2.21 for 2019.