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Radian Group (RDN) Up 53.8% in a Year: Room for More Upside?
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Shares of Radian Group Inc. (RDN - Free Report) have gained 53.8% in a year compared with the industry's increase of 33.3%. The Zacks S&P 500 composite has rallied 30.4% in the said time frame. With a market capitalization of $4.3 billion, average volume of shares traded in the last three months was 1.4 million.
Image Source: Zacks Investment Research
The rally was largely driven by lower refinance activity, better credit performance, sufficient liquidity and effective capital deployment.
The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $2.78 and $3.01, indicating year-over-year increase of 59.8% and 8%, respectively.
It has a decent earnings surprise history. Its bottom-line beat estimates in each of the last four quarters, the average being 9.43%.
Will the Bull Run Continue?
Estimates for 2021 and 2022 have moved up nearly 1.8% and 1.3%, respectively, in the past seven days that reflects investors’ optimism.
Lower refinance activity should benefit quarterly annualized persistency, which is expected to improve in the second half of 2021.
Radian noted that per the recent market projections for 2021, total mortgage originations are estimated to be approximately $3.9 trillion.
The purchase market continues to grow, which is a positive for the mortgage insurance industry, given the higher likelihood that purchase loans will utilize private mortgage insurance as compared to refinance loans.
Radian Group expects the private mortgage insurance market to be worth nearly $550 billion to $600 billion, which will represent the second highest MI volume year in history.
Radian witnessed continued improvement in the credit performance of portfolio with a 42% year-over-year decline in total number of defaulted loans in the second quarter.
Better-than-expected cure activity and declining number of new defaults are expected to lower the loss provision. In the second quarter, new notices of default were at or below pre-COVID due default levels.
Increase in title revenues as well as growth in valuation business should benefit the homegenius segment. Radian believes homegenius is capable of significant value creation and financial contribution in the long run.
Higher investment yields as well as additional investment balances from underwriting cash flow are likely to boost investment income.
The company’s solvency level is impressive as well. In terms of capital strength, Radian Group maintained a strong capital position with $1.2 billion of total holding company liquidity. Also, Radian Guaranty's PMIERs excess available assets grew to $1.9 billion in the second quarter.
Banking on financial flexibility provided by available liquidity at Radian Group, it is well poised to support businesses and deliver value to shareholders.
Recently, the board of directors approved a $200 million increase in its share buyback program, allowing the company to spend up to $237 million to repurchase its common stock through Aug 31, 2022.
The company raised its dividend at a seven-year (2014-2021) CAGR of 80.5% and the company’s current dividend yield stands at 2.4%, which betters the industry average of 2.1%.
Moreover, Radian’s return on equity was 12.4% in the trailing 12-month period, higher than the industry average of 9.8%. This indicates its efficiency in utilizing its shareholders’ funds.
Radian Group currently carries a Zacks Rank #3 (Hold) and is well poised for progress, as is evident from its favorable VGM Score of B. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.
Image: Bigstock
Radian Group (RDN) Up 53.8% in a Year: Room for More Upside?
Shares of Radian Group Inc. (RDN - Free Report) have gained 53.8% in a year compared with the industry's increase of 33.3%. The Zacks S&P 500 composite has rallied 30.4% in the said time frame. With a market capitalization of $4.3 billion, average volume of shares traded in the last three months was 1.4 million.
Image Source: Zacks Investment Research
The rally was largely driven by lower refinance activity, better credit performance, sufficient liquidity and effective capital deployment.
The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $2.78 and $3.01, indicating year-over-year increase of 59.8% and 8%, respectively.
It has a decent earnings surprise history. Its bottom-line beat estimates in each of the last four quarters, the average being 9.43%.
Will the Bull Run Continue?
Estimates for 2021 and 2022 have moved up nearly 1.8% and 1.3%, respectively, in the past seven days that reflects investors’ optimism.
Lower refinance activity should benefit quarterly annualized persistency, which is expected to improve in the second half of 2021.
Radian noted that per the recent market projections for 2021, total mortgage originations are estimated to be approximately $3.9 trillion.
The purchase market continues to grow, which is a positive for the mortgage insurance industry, given the higher likelihood that purchase loans will utilize private mortgage insurance as compared to refinance loans.
Radian Group expects the private mortgage insurance market to be worth nearly $550 billion to $600 billion, which will represent the second highest MI volume year in history.
Radian witnessed continued improvement in the credit performance of portfolio with a 42% year-over-year decline in total number of defaulted loans in the second quarter.
Better-than-expected cure activity and declining number of new defaults are expected to lower the loss provision. In the second quarter, new notices of default were at or below pre-COVID due default levels.
Increase in title revenues as well as growth in valuation business should benefit the homegenius segment. Radian believes homegenius is capable of significant value creation and financial contribution in the long run.
Higher investment yields as well as additional investment balances from underwriting cash flow are likely to boost investment income.
The company’s solvency level is impressive as well. In terms of capital strength, Radian Group maintained a strong capital position with $1.2 billion of total holding company liquidity. Also, Radian Guaranty's PMIERs excess available assets grew to $1.9 billion in the second quarter.
Banking on financial flexibility provided by available liquidity at Radian Group, it is well poised to support businesses and deliver value to shareholders.
Recently, the board of directors approved a $200 million increase in its share buyback program, allowing the company to spend up to $237 million to repurchase its common stock through Aug 31, 2022.
The company raised its dividend at a seven-year (2014-2021) CAGR of 80.5% and the company’s current dividend yield stands at 2.4%, which betters the industry average of 2.1%.
Moreover, Radian’s return on equity was 12.4% in the trailing 12-month period, higher than the industry average of 9.8%. This indicates its efficiency in utilizing its shareholders’ funds.
Radian Group currently carries a Zacks Rank #3 (Hold) and is well poised for progress, as is evident from its favorable VGM Score of B. Here V stands for Value, G for Growth and M for Momentum, with the score being a weighted combination of all three factors.
Key Players
Some better-ranked players in the multi-line insurance industry include Old Republic International Corporation (ORI - Free Report) , Horace Mann Educators Corporation (HMN - Free Report) , and CNO Financial Group, Inc. (CNO - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Old Republic International has a trailing four-quarter earnings surprise of 59.51%, on average.
Horace Mann Educators surpassed estimates in each of the last four quarters, with the average being 21.12%.
CNO Financial surpassed estimates in three of the last four quarters (while missing in one), with the average being 26.12%.