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RDN Stock Trading at Discount to Industry at 1.02X: Time to Buy?
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Radian Group Inc. (RDN - Free Report) shares are trading at a discount to the Zacks Multi-line Insurance industry. Its forward price-to-book value of 1.02X is lower than the industry average of 2.24X, the Finance sector’s 3.56X and the Zacks S&P 500 composite’s 8.6X.
Image Source: Zacks Investment Research
The insurer has a market capitalization of $4.72 billion. The average volume of shares traded in the last three months was 1.05 million.
The stock remains attractively valued compared with CNO Financial Group, Inc. (CNO - Free Report) , EverQuote, Inc. (EVER - Free Report) and Assurant, Inc. (AIZ - Free Report) .
Radian Group shares have gained 2.5% in the past six months, outperforming the industry growth of 0.9%. The Zacks S&P 500 index and the Finance sector have returned 7.7% and 3.9%, respectively, in the said time frame.
RDN Price Performance
Image Source: Zacks Investment Research
RDN Trading Above 50-Day and 200-Day Moving Averages
This multi-line insurer is trading above its 50-day and 200-day simple moving averages (SMA) of $34.24 and $33.11, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.
RDN’s Encouraging Growth Projections
The Zacks Consensus Estimate for Radian Group’s 2024 earnings per share indicates an increase of 3% from the year-ago reported number. The consensus estimate for revenues is pegged at $1.26 billion, implying a year-over-year improvement of 6.4%.
The consensus estimate for 2025 revenues indicates an increase of 4.8% from the corresponding 2024 estimates.
Earnings of Radian Group grew 8.5% in the last five years. ORI has a solid surprise history. The multi-line insurer has a solid track record of beating earnings estimates in each of the last four quarters, the average being 17.65%.
Optimistic Analyst Sentiment for RDN
Each of the two analysts covering the stock has raised estimates for 2024 and 2025 over the past 60 days. Thus, the Zacks Consensus Estimate for 2024 and 2025 moved 6.7% and 3.1% north, respectively, in the last 60 days, reflecting analyst optimism.
RDN’s Return on Capital
Return on invested capital in the trailing 12 months was 7.8%, better than the industry average of 2.3%, reflecting RDN’s efficiency in utilizing funds to generate income.
Key Drivers of RDN
The insurer has intensified its focus on the core business and services with higher growth potential, ensuring a predictable and recurring fee-based revenue stream.
New business, combined with increasing annual persistency, should drive continued growth of the insurance-in-force portfolio. Radian’s mortgage insurance portfolio creates a strong foundation for future earnings.
Radian Group has been witnessing a declining pattern of claim filings. Thus, we expect paid claims to decrease further. A decline in loss and claims will strengthen the balance sheet and hence improve its financial profile.
Radian Group expects that the private mortgage insurance market will be approximately $300 billion in 2024, consistent with the prior year. It expects a healthy purchase market in 2024, driven by ongoing homebuyer demand and an expected decline in interest rates, which is a positive for mortgage insurers. The company believes that the resulting pent-up demand provides strong support for future purchase volume, which drives the growth in large and valuable insurance in-force portfolio.
The multi-line insurer has been strengthening its capital position with capital contribution, reinsurance transactions and cash position. This, in turn, aids the insurer to engage in wealth distribution.
The 9% increase in quarterly dividend in the first quarter of 2024 marks the fifth consecutive year in which RDN has increased the quarterly dividend, with a total increase of 96% over the past four years. Its current dividend yield of 3.1% betters the industry average of 2.5%, making it an attractive pick for yield-seeking investors.
Parting Thoughts
Improving mortgage insurance portfolio, declining claims, a solid capital position, effective capital deployment and favorable growth estimates should continue to favor mortgage insurers over the long term.
Image: Bigstock
RDN Stock Trading at Discount to Industry at 1.02X: Time to Buy?
Radian Group Inc. (RDN - Free Report) shares are trading at a discount to the Zacks Multi-line Insurance industry. Its forward price-to-book value of 1.02X is lower than the industry average of 2.24X, the Finance sector’s 3.56X and the Zacks S&P 500 composite’s 8.6X.
Image Source: Zacks Investment Research
The insurer has a market capitalization of $4.72 billion. The average volume of shares traded in the last three months was 1.05 million.
The stock remains attractively valued compared with CNO Financial Group, Inc. (CNO - Free Report) , EverQuote, Inc. (EVER - Free Report) and Assurant, Inc. (AIZ - Free Report) .
Radian Group shares have gained 2.5% in the past six months, outperforming the industry growth of 0.9%. The Zacks S&P 500 index and the Finance sector have returned 7.7% and 3.9%, respectively, in the said time frame.
RDN Price Performance
Image Source: Zacks Investment Research
RDN Trading Above 50-Day and 200-Day Moving Averages
This multi-line insurer is trading above its 50-day and 200-day simple moving averages (SMA) of $34.24 and $33.11, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.
RDN’s Encouraging Growth Projections
The Zacks Consensus Estimate for Radian Group’s 2024 earnings per share indicates an increase of 3% from the year-ago reported number. The consensus estimate for revenues is pegged at $1.26 billion, implying a year-over-year improvement of 6.4%.
The consensus estimate for 2025 revenues indicates an increase of 4.8% from the corresponding 2024 estimates.
Earnings of Radian Group grew 8.5% in the last five years. ORI has a solid surprise history. The multi-line insurer has a solid track record of beating earnings estimates in each of the last four quarters, the average being 17.65%.
Optimistic Analyst Sentiment for RDN
Each of the two analysts covering the stock has raised estimates for 2024 and 2025 over the past 60 days. Thus, the Zacks Consensus Estimate for 2024 and 2025 moved 6.7% and 3.1% north, respectively, in the last 60 days, reflecting analyst optimism.
RDN’s Return on Capital
Return on invested capital in the trailing 12 months was 7.8%, better than the industry average of 2.3%, reflecting RDN’s efficiency in utilizing funds to generate income.
Key Drivers of RDN
The insurer has intensified its focus on the core business and services with higher growth potential, ensuring a predictable and recurring fee-based revenue stream.
New business, combined with increasing annual persistency, should drive continued growth of the insurance-in-force portfolio. Radian’s mortgage insurance portfolio creates a strong foundation for future earnings.
Radian Group has been witnessing a declining pattern of claim filings. Thus, we expect paid claims to decrease further. A decline in loss and claims will strengthen the balance sheet and hence improve its financial profile.
Radian Group expects that the private mortgage insurance market will be approximately $300 billion in 2024, consistent with the prior year. It expects a healthy purchase market in 2024, driven by ongoing homebuyer demand and an expected decline in interest rates, which is a positive for mortgage insurers. The company believes that the resulting pent-up demand provides strong support for future purchase volume, which drives the growth in large and valuable insurance in-force portfolio.
The multi-line insurer has been strengthening its capital position with capital contribution, reinsurance transactions and cash position. This, in turn, aids the insurer to engage in wealth distribution.
The 9% increase in quarterly dividend in the first quarter of 2024 marks the fifth consecutive year in which RDN has increased the quarterly dividend, with a total increase of 96% over the past four years. Its current dividend yield of 3.1% betters the industry average of 2.5%, making it an attractive pick for yield-seeking investors.
Parting Thoughts
Improving mortgage insurance portfolio, declining claims, a solid capital position, effective capital deployment and favorable growth estimates should continue to favor mortgage insurers over the long term.
Coupled with the positives, higher return on capital as well as affordability of shares, the time appears right for potential investors to bet on this Zacks Rank #2 (Buy) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.