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Radian Group's (RDN) Prospects Look Bright: Should You Hold?
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Shares of Radian Group Inc. (RDN - Free Report) gained 0.98% since Jan 26, when the Multi line insurer reported better-than-expected earnings for fourth-quarter 2016. The shares also outperformed the Zacks categorized Multi line industry’s growth of 0.61%. We expect the stock to retain its momentum on the back of a number of positives.
The Multi line insurer’s mortgage insurance portfolio, which comprises a high volume of quality and profitable business written by the company after 2008, is expected to create a strong foundation for the future earnings. The company grew its insurance in force nearly 14% in three years through 2016. Given the projected increase in persistency, the company anticipates insurance in force to rise in 2017.
Radian Group has been witnessing a decline in claim payments over the last few years. The trend remained unchanged in 2016 with a considerable reduction in the same to $417.6 million. This apart, the company remains committed toward cost control. The multi line insurer successfully achieved its goal of 3–5% expense reduction from the prior-year level.
In addition, Radian Group’s inorganic growth continues to impress. We expect the company’s inorganic growth initiatives to continue diversifying its revenue stream and expanding its business beyond traditional mortgage insurance.
Also, the Zacks Rank #3 (Hold) multi line insurer’s efforts to strengthen its financial position and improve debt maturity profile encourage.
However, stiff competition and regulatory hurdles continue to pose risks for the company.
Nonetheless, Radian Group carries a VGM score of B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. In fact, valuation at the current level is attractive as the stock is trading at a forward P/E ratio of 10.6, a 12.4% discount to the industry average of 12.1. Further, Radian Group has a trailing 12-month return on equity (ROE) of 12.6%, which is higher than the industry average of 6.2%.
Stocks to Consider
Some better-ranked stocks from the insurance industry include American Financial Group, Inc. (AFG - Free Report) , Argo Group International Holdings, Ltd. and Selective Insurance Group, Inc. (SIGI - Free Report) . Each of these stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
American Financial offers P&C insurance products in the U.S. The company delivered positive surprises in three of the last four quarters with an average beat of 6.45%.
Argo Group underwrites specialty insurance and reinsurance products in the property and casualty market worldwide. The company delivered positive surprises in all of the last four quarters with an average beat of 36.54%.
Selective Insurance provides insurance products and services in the U.S. The company delivered a positive surprise in one of the last four quarters, but with an average negative surprise of 4.53%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017? Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>
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Radian Group's (RDN) Prospects Look Bright: Should You Hold?
Shares of Radian Group Inc. (RDN - Free Report) gained 0.98% since Jan 26, when the Multi line insurer reported better-than-expected earnings for fourth-quarter 2016. The shares also outperformed the Zacks categorized Multi line industry’s growth of 0.61%. We expect the stock to retain its momentum on the back of a number of positives.
The Multi line insurer’s mortgage insurance portfolio, which comprises a high volume of quality and profitable business written by the company after 2008, is expected to create a strong foundation for the future earnings. The company grew its insurance in force nearly 14% in three years through 2016. Given the projected increase in persistency, the company anticipates insurance in force to rise in 2017.
Radian Group has been witnessing a decline in claim payments over the last few years. The trend remained unchanged in 2016 with a considerable reduction in the same to $417.6 million. This apart, the company remains committed toward cost control. The multi line insurer successfully achieved its goal of 3–5% expense reduction from the prior-year level.
In addition, Radian Group’s inorganic growth continues to impress. We expect the company’s inorganic growth initiatives to continue diversifying its revenue stream and expanding its business beyond traditional mortgage insurance.
Also, the Zacks Rank #3 (Hold) multi line insurer’s efforts to strengthen its financial position and improve debt maturity profile encourage.
However, stiff competition and regulatory hurdles continue to pose risks for the company.
Nonetheless, Radian Group carries a VGM score of B. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. In fact, valuation at the current level is attractive as the stock is trading at a forward P/E ratio of 10.6, a 12.4% discount to the industry average of 12.1. Further, Radian Group has a trailing 12-month return on equity (ROE) of 12.6%, which is higher than the industry average of 6.2%.
Stocks to Consider
Some better-ranked stocks from the insurance industry include American Financial Group, Inc. (AFG - Free Report) , Argo Group International Holdings, Ltd. and Selective Insurance Group, Inc. (SIGI - Free Report) . Each of these stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
American Financial offers P&C insurance products in the U.S. The company delivered positive surprises in three of the last four quarters with an average beat of 6.45%.
Argo Group underwrites specialty insurance and reinsurance products in the property and casualty market worldwide. The company delivered positive surprises in all of the last four quarters with an average beat of 36.54%.
Selective Insurance provides insurance products and services in the U.S. The company delivered a positive surprise in one of the last four quarters, but with an average negative surprise of 4.53%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017? Who wouldn't? Last year's market-beating Top 10 portfolio produced 5 double-digit winners. For example, oil and natural gas giant Pioneer Natural Resources and First Republic Bank racked up stellar gains of +44.9% and +44.3% respectively. Now a brand-new list for 2017 has been hand-picked from 4,400 companies covered by the Zacks Rank. See the 2017 Top 10 right now>>