Critical Survey: NMI (NASDAQ:NMIH) and Mercury General (NYSE:MCY)

Mercury General (NYSE:MCY) and NMI (NASDAQ:NMIH) are both mid-cap finance companies, but which is the better stock? We will compare the two companies based on the strength of their risk, analyst recommendations, dividends, institutional ownership, earnings, valuation and profitability.

Institutional & Insider Ownership

42.4% of Mercury General shares are owned by institutional investors. Comparatively, 94.1% of NMI shares are owned by institutional investors. 35.5% of Mercury General shares are owned by insiders. Comparatively, 3.0% of NMI shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Analyst Ratings

This is a breakdown of recent ratings for Mercury General and NMI, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Mercury General	0	0	1	2	3.67
NMI	0	1	4	0	2.80

Mercury General presently has a consensus target price of $100.00, suggesting a potential upside of 14.02%. NMI has a consensus target price of $43.00, suggesting a potential upside of 14.82%. Given NMI’s higher possible upside, analysts plainly believe NMI is more favorable than Mercury General.

Profitability

This table compares Mercury General and NMI’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Mercury General	9.03%	20.74%	4.72%
NMI	55.05%	15.78%	10.64%

Volatility and Risk

Mercury General has a beta of 0.92, meaning that its stock price is 8% less volatile than the S&P 500. Comparatively, NMI has a beta of 0.63, meaning that its stock price is 37% less volatile than the S&P 500.

Earnings & Valuation

This table compares Mercury General and NMI”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Mercury General	$5.99 billion	0.81	$541.09 million	$9.77	8.98
NMI	$706.44 million	4.04	$388.93 million	$4.91	7.63

Mercury General has higher revenue and earnings than NMI. NMI is trading at a lower price-to-earnings ratio than Mercury General, indicating that it is currently the more affordable of the two stocks.

Summary

Mercury General beats NMI on 9 of the 15 factors compared between the two stocks.

About Mercury General

Mercury General Corporation, together with its subsidiaries, engages in writing personal automobile insurance in the United States. The company also writes homeowners, commercial automobile, commercial property, mechanical protection, and umbrella insurance products. Its automobile insurance products include collision, property damage, bodily injury, comprehensive, personal injury protection, underinsured and uninsured motorist, and other hazards; and homeowners insurance products comprise dwelling, liability, personal property, and other coverages. The company sells its policies through a network of independent agents, insurance agencies, as well as directly through internet sales portals in Arizona, California, Florida, Georgia, Illinois, Nevada, New Jersey, New York, Oklahoma, Texas, and Virginia. Mercury General Corporation was founded in 1961 and is headquartered in Los Angeles, California.

About NMI

NMI Holdings, Inc. provides private mortgage guaranty insurance services in the United States. The company offers mortgage insurance services, such as primary and pool insurance; and outsourced loan review services to mortgage loan originators. It serves national and regional mortgage banks, money center banks, credit unions, community banks, builder-owned mortgage lenders, internet-sourced lenders, and other non-bank lenders. The company was incorporated in 2011 and is headquartered in Emeryville, California.