Here's Why Radian Group (RDN) Stock is an Attractive Pick Now
Radian Group Inc. RDN has been gaining momentum on the back of improved persistency and mortgage insurance portfolio, robust capital position as well as prudent capital deployment.
Northbound Estimate Revision
The Zacks Consensus Estimate for 2023 and 2024 has moved 6.5% and 1.6% north, respectively, in the past 60 days, reflecting analysts’ optimism on the stock.
Earnings Surprise History
Radian Group hasa decent earnings surprise history. It surpassed estimates in each of the last four quarters, the average being 38.72%.
Zacks Rank & Price Performance
Radian Group currently carries a Zacks Rank #2 (Buy). The stock has gained 19.8% against the industry’s decline of 3% in the past year.
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Return on Equity
RDN’s return on equity for the trailing 12 months is 19.9%, better than the industry average of 9.8%. The metric expanded 270 basis points year over year. This reflects its efficiency in utilizing shareholders’ funds.
Attractive Valuation
RDN shares are trading at a price to book value multiple of 0.9, lower than the industry average of 2.2. It also has a Value Score of A. This style score helps find the most attractive value stocks. Back-tested results have shown that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or #2, offer better returns.
Business Tailwinds
Radian Group remains focused on improving its mortgage insurance portfolio, the main catalyst of long-term earnings growth and managing capital resources, the strategic value creation areas.
The growth in the purchase market is a positive for the mortgage insurance industry. Persistency should improve given higher mortgage interest rates.
Continued high levels of the new mortgage insurance business, as well as an increase in persistency, are likely to drive the primary insurance in force, the main driver of future earnings for Radian Group.
The insurer took a few initiatives that will consolidate its capital structure by extending debt maturities while enhancing financial flexibility. Currently, RDN has available, unrestricted cash and liquid investments of $956 million. The holding company liquidity includes the benefit from a $100 million ordinary dividend paid by Radian Guaranty. Also, the company has been effectively trying to lower its debt level over the last few years.
Radian Group maintains a solid balance sheet with sufficient liquidity and strong cash flows. A strong capital position helps the insurer deploy capital via share repurchases and dividend hikes that enhance shareholders value. Its current dividend yield of 3.3% is better than the industry average of 2.7%. The board had approved a new two-year $300 million share buyback program in January 2023. The remaining repurchase capacity was pegged at $280 million as of Mar 31, 2023.
Other Stocks to Consider
Some other top-ranked stocks from the multi-line insurance industry are Assurant, Inc. AIZ, MGIC Investment Corporation MTG and CNO Financial Group, Inc. CNO. While Assurant sports a Zacks Rank #1, MGIC Investment and CNO Financial carrya Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Assurant’s earnings surpassed estimates in three of the last four quarters and missed in one, the average earnings surprise being 9.96%.
The Zacks Consensus Estimate for AIZ’s 2023 and 2024 earnings implies 3.6% and 21.5% year-over-year growth, respectively. In the past year, the insurer has lost 28.8%.
MGIC Investment has a solid track record of beating earnings estimates in each of the last four quarters, the average being 30.18%.
The Zacks Consensus Estimate for 2023 and 2024 has moved 3.3% and 0.4% north, respectively, in the past 60 days, reflecting analysts’ optimism. In the past year, the insurer has gained 18.9%.
CNO Financial’s earnings surpassed estimates in three of the last four quarters and missed in one, the average earnings surprise being 15.35%.
The Zacks Consensus Estimate for CNO’s 2023 and 2024 earnings implies 19.3% and 6.2% year-over-year growth, respectively. In the past year, the insurer has gained 32.5%.
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MGIC Investment Corporation (MTG) : Free Stock Analysis Report
CNO Financial Group, Inc. (CNO) : Free Stock Analysis Report
Assurant, Inc. (AIZ) : Free Stock Analysis Report
Radian Group Inc. (RDN) : Free Stock Analysis Report
