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MGIC Investment Corporation (MTG) Intrinsic Value

DCF-based fair value calculation with Bear, Base, and Bull scenarios

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MGIC Investment Corporation (MTG)

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Intrinsic Value (DCF)

Current$26.20
→
Intrinsic$53.87
+106%
$36.34$53.87$87.19
Market implies 1% growth for 5 years
DCF analysis suggests MTG could have 106% upside at 9% growth — verify assumptions match your view.
At $26, the market prices in only 1% growth — below historical 9%, suggesting low expectations.
Range: Bear $36 → Bull $87. Current price implies expectations below the bear case — very conservative expectations.
Discount ↓Growth →5%7%9%11%
8%$64$70$77$84
10%$45$49$54$59
12%$35$38$41$45
14%$28$31$33$36

Bull Case

  • Bull case ($87) offers 233% upside at 11% growth, 9% discount
  • Price below even worst-case scenario — strong margin of safety
  • Market-implied growth (1%) ≤ historical CAGR (9%)

Bear Case

  • Bear case ($36) with 7% growth, 12% discount rate
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5-Year Net Income Projection

Year 1$834.19M
Year 2$912.04M
Year 3$997.14M
Year 4$1.09B
Year 5$1.19B
Terminal$17.54B

📐 Model Inputs

Growth Rate9.3%5Y CAGR (cascade: 5Y→3Y→TTM)
Discount Rate10.0%WACC estimate
Terminal Growth3.0%Perpetuity rate
Base Net Income$762.99MTTM actual
Bear g×0.8, r+2%
Base Historical CAGR
Bull g×1.2, r−1.5%
ℹ️

DCF estimates based on historical growth rates extrapolated forward. Uses Net Income (FCF not meaningful for insurers). See FAQ below for full methodology.

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Frequently Asked Questions

Is MTG stock undervalued or overvalued?
🟢 UNDERVALUED

MTG trades at $26.20 vs. our DCF-derived intrinsic value of $53.87, implying +86% upside. At a 10.0% WACC and 9.3% projected FCF growth, the market appears to be underpricing the present value of MTG's future cash flows. The bear case ($38.12) still suggests upside, providing margin of safety.

What is MTG's intrinsic value?

Using a 5-year DCF model: Base FCF of $763M, projected at 9.3% 5Y CAGR (best of revenue, EPS, or FCF growth), discounted at 10.0% WACC, with 3.0% terminal growth. Terminal value calculated via Gordon Growth Model: TV = FCF₅ × (1+g) / (WACC−g). After deducting $415M net debt and dividing by 0.26B shares: Bear $38.12 | Base $53.87 | Bull $75.19. Current price $26.20 implies +86% to base case.

How is MTG's fair value calculated?

DCF Methodology:

① Project FCF years 1-5 using 9.3% growth derived from 5-year historical CAGR (best of revenue, EPS, or FCF growth, with 8% floor and 25% cap).

② Calculate terminal value at year 5 using perpetuity growth model with g=3.0%.

③ Discount all cash flows to PV using WACC=10.0%.

④ Sum PV of explicit period + PV of terminal value = Enterprise Value ($14.64B).

⑤ Subtract net debt, divide by shares outstanding.

Sensitivity analysis available above—adjust WACC ±2% or growth ±3% to stress-test the valuation. Implied EV/FCF multiple: 19.2x.