Assured Guaranty (AGO) & MGIC Investment (MTG) Critical Review

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

Profitability

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

Net Margins Return on Equity Return on Assets
Assured Guaranty 41.98% 9.76% 4.53%
MGIC Investment 33.37% 17.36% 9.08%

Earnings and Valuation

This table compares Assured Guaranty and MGIC Investment’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Assured Guaranty $1.74 billion 2.48 $730.00 million N/A N/A
MGIC Investment $1.07 billion 3.82 $355.76 million $1.36 8.08

Assured Guaranty has higher revenue and earnings than MGIC Investment.

Dividends

Assured Guaranty pays an annual dividend of $0.64 per share and has a dividend yield of 1.7%. MGIC Investment does not pay a dividend. Assured Guaranty has raised its dividend for 6 consecutive years.

Volatility and Risk

Assured Guaranty has a beta of 1.3, suggesting that its stock price is 30% more volatile than the S&P 500. Comparatively, MGIC Investment has a beta of 1.95, suggesting that its stock price is 95% more volatile than the S&P 500.

Insider & Institutional Ownership

97.8% of Assured Guaranty shares are owned by institutional investors. Comparatively, 92.7% of MGIC Investment shares are owned by institutional investors. 2.5% of Assured Guaranty shares are owned by company insiders. Comparatively, 1.0% of MGIC Investment shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Assured Guaranty and MGIC Investment, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Assured Guaranty 0 0 3 0 3.00
MGIC Investment 0 0 12 0 3.00

Assured Guaranty presently has a consensus target price of $48.50, suggesting a potential upside of 29.78%. MGIC Investment has a consensus target price of $16.66, suggesting a potential upside of 51.58%. Given MGIC Investment’s higher possible upside, analysts clearly believe MGIC Investment is more favorable than Assured Guaranty.

Assured Guaranty Company Profile

Assured Guaranty Ltd. is a holding company. The Company, through its subsidiaries, provides credit protection products to the United States and international public finance, including infrastructure, and structured finance markets. It applies its credit underwriting judgment, risk management skills and capital markets experience primarily to offer financial guaranty insurance that protects holders of debt instruments and other monetary obligations from defaults in scheduled payments. It markets its financial guaranty insurance directly to issuers and underwriters of public finance and structured finance securities, as well as to investors in such obligations. It guarantees obligations issued principally in the United States and the United Kingdom and also guarantees obligations issued in other countries and regions, including Australia and Western Europe. It also provides other forms of insurance that are in line with its risk profile and benefit from its underwriting experience.

MGIC Investment Company Profile

MGIC Investment Corporation is a holding company. The Company, through its subsidiaries, provides private mortgage insurance and ancillary services. The Company provides mortgage insurance to lenders throughout the United States and to government-sponsored entities to protect against loss from defaults on low down payment residential mortgage loans. Its principal product is primary mortgage insurance. Primary insurance provides mortgage default protection on individual loans and covers unpaid loan principal, delinquent interest and certain expenses associated with the default and subsequent foreclosure or sale approved by the Company. Through certain other non-insurance subsidiaries, the Company also provides various services for the mortgage finance industry, such as contract underwriting, analysis of loan originations and portfolios, and mortgage lead generation. The Company’s subsidiaries include Mortgage Guaranty Insurance Corporation (MGIC) and MGIC Indemnity Corporation (MIC).

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