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Here's Why Radian Group (RDN) is a Lucrative Investment Pick
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Radian Group Inc. (RDN - Free Report) has built a name for itself by offering its clients, which include homebuyers and mortgage lenders to name a few, with a range of private mortgage insurance and related risk management products and services. Here we will discuss about the factors, consistently driving the company’s favorable results over a considerable period of time and are anticipated to repeat the trend in the near term.
Factors Pushing for a Favorable Performance
Radian Group relies heavily on its mortgage insurance portfolio, its major earnings driver. The company has been witnessing continued growth in its insurance in force, mainly fueled by lower level of refinancing and increase in new mortgage insurance business. This has provided the company with the required support to boost its bottom-line growth and we expect further improvement of insurance in force to continue with the momentum in future.
In fact, the Zacks Consensus Estimate for first-quarter 2018 is pegged at 59 cents per share, reflecting 59.5% year-over-year growth.
This apart, banking on the solid credit characteristics of the new insured loans, the company expects to see a noticeable decline in its claims payments in the near term. Lower level of paid claims creates a strong base for the company’s favorable performance in the near term, thereby accelerating growth.
Additionally, Radian Group remains optimistic about its efforts in restructuring the business, focusing mainly on its core business and services that will generate higher fee-based revenues, ensuring higher growth on a long-term basis. In fact, the company divested its Clayton EuroRisk to a global investment firm in November 2017. With this move, Radian Group will stop offering products and services to its Mortgage and Real Estate Services business in Europe. The company intends to position its Service segment for continued profitability. EBITDA margin for the Services segment is projected in the 10-15% range over time.
Further, the company’s robust capital position bodes well for growth and invokes optimism among investors, increasing their confidence in the stock.
Other Driving Factors
Apart from the above-mentioned positive factors, we will take a look at some of the factors with potential to help boost the company’s overall results.
Shares of this Zacks Rank #2 (Buy) Multi line insurer have outperformed the industry in a year’s time. The stock has gained 5.6% compared with the industry’s increase of 0.7%. We expect the company’s shares to trend higher in the near term on the back of the aforementioned positives.
Interestingly, the company has an impressive VGM Score of B and our research shows that stocks with a VGM Score of A or B when combined with a bullish Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities.
Moreover, the company’s growth projections look promising. The Zacks Consensus Estimate for current-year earnings per share is pegged at $2.41 and at $2.68 for 2019, thus marking a year-over-year rise of 32.4% and 10.9%, respectively.
While the top line reflects a 7.7% year-over-year increase for both 2018 and 2019.
Furthermore, recent positive revisions have raised the 2018 Zacks Consensus Estimate for Radian Group to $2.41, up 0.4% over the last 60 days. The consensus mark of $2.68 for 2019 has also inched up 0.8%.
The company’s earnings have surpassed the Zacks Consensus Estimate in three of the last four quarters with an average beat of 7.9%.
Other Stocks to Consider
Investors interested in other top-ranked stocks from the insurance industry may also consider Alleghany Corporation , Everest Re Group, Ltd. and National General Holdings Corp. , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alleghany Corporation provides property and casualty reinsurance and insurance products in the United States and internationally. The company delivered positive surprises in two of the last four quarters with an average beat of 5.2%.
Everest Re provides reinsurance and insurance products. The company pulled off positive surprises in three of the last four quarters with an average beat of 43.7%.
National General Holdings provides various insurance products and services in the United States. The company came up with positive surprises in two of the last four quarters with an average beat of 11.5%.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.
Image: Bigstock
Here's Why Radian Group (RDN) is a Lucrative Investment Pick
Radian Group Inc. (RDN - Free Report) has built a name for itself by offering its clients, which include homebuyers and mortgage lenders to name a few, with a range of private mortgage insurance and related risk management products and services. Here we will discuss about the factors, consistently driving the company’s favorable results over a considerable period of time and are anticipated to repeat the trend in the near term.
Factors Pushing for a Favorable Performance
Radian Group relies heavily on its mortgage insurance portfolio, its major earnings driver. The company has been witnessing continued growth in its insurance in force, mainly fueled by lower level of refinancing and increase in new mortgage insurance business. This has provided the company with the required support to boost its bottom-line growth and we expect further improvement of insurance in force to continue with the momentum in future.
In fact, the Zacks Consensus Estimate for first-quarter 2018 is pegged at 59 cents per share, reflecting 59.5% year-over-year growth.
This apart, banking on the solid credit characteristics of the new insured loans, the company expects to see a noticeable decline in its claims payments in the near term. Lower level of paid claims creates a strong base for the company’s favorable performance in the near term, thereby accelerating growth.
Additionally, Radian Group remains optimistic about its efforts in restructuring the business, focusing mainly on its core business and services that will generate higher fee-based revenues, ensuring higher growth on a long-term basis. In fact, the company divested its Clayton EuroRisk to a global investment firm in November 2017. With this move, Radian Group will stop offering products and services to its Mortgage and Real Estate Services business in Europe. The company intends to position its Service segment for continued profitability. EBITDA margin for the Services segment is projected in the 10-15% range over time.
Further, the company’s robust capital position bodes well for growth and invokes optimism among investors, increasing their confidence in the stock.
Other Driving Factors
Apart from the above-mentioned positive factors, we will take a look at some of the factors with potential to help boost the company’s overall results.
Shares of this Zacks Rank #2 (Buy) Multi line insurer have outperformed the industry in a year’s time. The stock has gained 5.6% compared with the industry’s increase of 0.7%. We expect the company’s shares to trend higher in the near term on the back of the aforementioned positives.
Interestingly, the company has an impressive VGM Score of B and our research shows that stocks with a VGM Score of A or B when combined with a bullish Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities.
Moreover, the company’s growth projections look promising. The Zacks Consensus Estimate for current-year earnings per share is pegged at $2.41 and at $2.68 for 2019, thus marking a year-over-year rise of 32.4% and 10.9%, respectively.
While the top line reflects a 7.7% year-over-year increase for both 2018 and 2019.
Furthermore, recent positive revisions have raised the 2018 Zacks Consensus Estimate for Radian Group to $2.41, up 0.4% over the last 60 days. The consensus mark of $2.68 for 2019 has also inched up 0.8%.
The company’s earnings have surpassed the Zacks Consensus Estimate in three of the last four quarters with an average beat of 7.9%.
Other Stocks to Consider
Investors interested in other top-ranked stocks from the insurance industry may also consider Alleghany Corporation , Everest Re Group, Ltd. and National General Holdings Corp. , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alleghany Corporation provides property and casualty reinsurance and insurance products in the United States and internationally. The company delivered positive surprises in two of the last four quarters with an average beat of 5.2%.
Everest Re provides reinsurance and insurance products. The company pulled off positive surprises in three of the last four quarters with an average beat of 43.7%.
National General Holdings provides various insurance products and services in the United States. The company came up with positive surprises in two of the last four quarters with an average beat of 11.5%.
Zacks Editor-in-Chief Goes "All In" on This Stock
Full disclosure, Kevin Matras now has more of his own money in one particular stock than in any other. He believes in its short-term profit potential and also in its prospects to more than double by 2019. Today he reveals and explains his surprising move in a new Special Report.
Download it free >>