Radian Group, Inc. RDN is well-poised for growth, given its solid mortgage insurance portfolio and decline in levels of paid claims.
This Zacks Rank #2 (Buy) stock carries a favorable Value Score of A. Back-tested results show that stocks with Value Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 are best investment options.
Estimates for Radian Group have been revised upward over the past 60 days, reflecting analysts’ confidence in the stock. The Zacks Consensus Estimate for 2019 earnings per share has moved 4.7% north while that for 2020 has moved up 3.6% in the said time frame.
The Zacks Consensus Estimate for 2019 and 2020 earnings per share is pegged at $3.09 and $3.16, indicating increase of nearly 14.9% and 2.2%, respectively from the year-ago reported figure. The expected long-term earnings growth rate is 5%.
Shares of Radian Group have rallied 55.5% year to date, outperforming the industry’s increase of 13.4%.
This mortgage insurers’ return on equity was 17.4% in the trailing 12-month period, higher than the industry average of 8.1%. Return on equity is a profitability measure that identifies the company’s efficiency in utilizing its shareholders’ funds.
The company also has a decent history of beating estimates in the last four quarters with the average beat being 10.05%.
Radian Group continues to expect growth in future earnings driven by its mortgage insurance portfolio, which increased 17.3% year over year in the first nine months of 2019. Increased persistency and focus on improving the mortgage insurance portfolio are expected to enhance the company’s earnings.
Also, decline in claim payments over the past few years indicates an improved operating environment.
However, escalating expenses due to increase in provision for loss, cost of services, other operating expenses and loss on extinguishment of debt are likely to weigh on operating margin. In the first nine months of 2019, expenses increased 14.2% from the year-ago period.
Other Stocks to Consider
Some other top-ranked stocks from the space include Kemper Corporation KMPR, EverQuote, Inc. EVER and MGIC Investment Corporation MTG, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Kemper provides property and casualty, and life and health insurance to individuals and businesses in the United States. The company beat the Zacks Consensus Estimate in the trailing four quarters, the average beat being 16.40%.
EverQuote enables consumers to shop for auto, home, and life insurance quotes. It serves carriers, agents, financial advisors, and indirect distributors and aggregators. The company surpassed the Zacks Consensus Estimate in the trailing four quarters, the average beat being 84.25%.
MGIC Investment provides private mortgage insurance and ancillary services to lenders and government-sponsored entities in the United States. The company outpaced the Zacks Consensus Estimate in the trailing four quarters, the average beat being 12.63%.
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