Is Now The Time To Put MGIC Investment (NYSE:MTG) On Your Watchlist?

The excitement of investing in a company that can reverse its fortunes is a big draw for some speculators, so even companies that have no revenue, no profit, and a record of falling short, can manage to find investors. Sometimes these stories can cloud the minds of investors, leading them to invest with their emotions rather than on the merit of good company fundamentals. Loss making companies can act like a sponge for capital – so investors should be cautious that they’re not throwing good money after bad.

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In contrast to all that, many investors prefer to focus on companies like MGIC Investment (NYSE:MTG), which has not only revenues, but also profits. While profit isn’t the sole metric that should be considered when investing, it’s worth recognising businesses that can consistently produce it.

See our latest analysis for MGIC Investment

The market is a voting machine in the short term, but a weighing machine in the long term, so you’d expect share price to follow earnings per share (EPS) outcomes eventually. That makes EPS growth an attractive quality for any company. It certainly is nice to see that MGIC Investment has managed to grow EPS by 18% per year over three years. If growth like this continues on into the future, then shareholders will have plenty to smile about.

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One way to double-check a company’s growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. The good news is that MGIC Investment is growing revenues, and EBIT margins improved by 2.3 percentage points to 84%, over the last year. Both of which are great metrics to check off for potential growth.

In the chart below, you can see how the company has grown earnings and revenue, over time. For finer detail, click on the image.

You don’t drive with your eyes on the rear-view mirror, so you might be more interested in this free report showing analyst forecasts for MGIC Investment’s future profits.

Owing to the size of MGIC Investment, we wouldn’t expect insiders to hold a significant proportion of the company. But we are reassured by the fact they have invested in the company. Holding US$80m worth of stock in the company is no laughing matter and insiders will be committed in delivering the best outcomes for shareholders. This would indicate that the goals of shareholders and management are one and the same.

You can’t deny that MGIC Investment has grown its earnings per share at a very impressive rate. That’s attractive. This EPS growth rate is something the company should be proud of, and so it’s no surprise that insiders are holding on to a considerable chunk of shares. The growth and insider confidence is looked upon well and so it’s worthwhile to investigate further with a view to discern the stock’s true value. Even so, be aware that MGIC Investment is showing 1 warning sign in our investment analysis , you should know about…

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