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Results: Radian Group Inc. Exceeded Expectations And The Consensus Has Updated Its Estimates

Simply Wall St

Radian Group Inc. (NYSE:RDN) just released its latest quarterly results and things are looking bullish. It was overall a positive result, with revenues beating expectations by 4.5% to hit US$380m. Radian Group reported earnings per share (EPS) US$0.83, which was a notable 14% above what analysts had forecast. Earnings are an important time for investors, as they can track a company's performance, look at what top analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We thought readers would find it interesting to see analysts' latest post-earnings forecasts for next year.

View our latest analysis for Radian Group

NYSE:RDN Past and Future Earnings, November 15th 2019

Taking into account the latest results, Radian Group's six analysts currently expect revenues in 2020 to be US$1.49b, approximately in line with the last 12 months. Earnings per share are expected to rise 3.5% to US$3.21. Yet prior to the latest earnings, analysts had been forecasting revenues of US$1.49b and earnings per share (EPS) of US$3.14 in 2020. So the consensus seems to have become somewhat more optimistic on Radian Group's earnings potential following these results.

The consensus price target was unchanged at US$28.96, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values Radian Group at US$33.50 per share, while the most bearish prices it at US$26.00. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.

In addition, we can look to Radian Group's past performance and see whether business is expected to improve, and if the company is expected to perform better than wider market. It's pretty clear that analysts expect Radian Group's revenue growth will slow down substantially, with revenues next year expected to grow 1.6%, compared to a historical growth rate of 4.4% over the past five years. Compare this against other companies (with analyst forecasts) in the market, which are in aggregate expected to see revenue growth of 5.1% next year. Factoring in the forecast slowdown in growth, it seems obvious that analysts still expect Radian Group to grow slower than the wider market.

The Bottom Line

The most important thing to take away from this is that analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Radian Group following these results. On the plus side, there were no major changes to revenue estimates; although analyst forecasts imply revenues will perform worse than the wider market. The consensus price target held steady at US$28.96, with the latest estimates not enough to have an impact on analysts' estimated valuations.

Still, the long-term prospects of the business are much more relevant than next year's earnings. We have estimates - from multiple Radian Group analysts - going out to 2021, and you can see them free on our platform here.

It might also be worth considering whether Radian Group's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.