Radian Group ( RDN Quick Quote RDN - Free Report) has been in investors' good books on the back of its lower refinance activity, higher title revenues and effective capital deployment. Growth Projections
The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $2.84 and $3.13, indicating a year-over-year increase of 63.2% and 10.2%, respectively.
The stock has seen its estimates for 2020 and 2021 move up nearly 4% and 5.4%, respectively in the past 60 days, reflecting investor optimism.
Earnings Surprise History
Radian Group has a decent earnings surprise history. It beat estimates in each of the last four quarters, with the average being 9.43%.
Zacks Rank & Price Performance
Radian Group currently sports a Zacks Rank #1 (Strong Buy). Year to date, the stock has rallied 16.8% compared with the
industry’s increase of 8.7%. Image Source: Zacks Investment Research Return on Equity (ROE)
The company’s ROE for the trailing 12 months is 12.4%, better than the industry average of 9.8%. This reflects the company’s efficiency in utilizing shareholders’ fund.
Strong purchase market and increase in refinance originations resulting from the low interest rate environment are expected to increase the total mortgage origination volume, which, in turn, will drive the new insurance written.
Radian Group expects rate of home price appreciation to moderate in 2021. The combination of an improving economy, strong housing dynamics, in terms of demand, supply, home values, and mortgage underwriting, relatively low mortgage interest rates, and income growth are expected to drive a healthy sustainable housing market. The company remains focused on improving its mortgage insurance portfolio, the main catalyst of long-term earnings growth. Given the increase in persistency, insurance in force is expected to rise going forward, which is expected to enhance its strong foundation for future earnings. Radian noted that per the recent market projections for 2021, total mortgage originations are estimated to be approximately $3.9 trillion. while the private mortgage insurance market is anticipated to be approximately $550 billion to $600 billion. It is set to be the second-highest MI volume year in history. Improving macroeconomic conditions and a strong home purchase market, fueled by first-time homebuyers, are expected to provide strong tailwinds for long-term growth and projected future earnings of the mortgage insurance portfolio. Lower refinance activity should benefit quarterly annualized persistency, which is expected to improve in the second half of 2021. An increase in title revenues as well as growth in valuation business and increased closed orders in title business are likely to fuel the performance of the homegenius segment. This segment is expected to have the potential for significant value creation and financial contribution going forward. Growth in closed title orders, as well as total homegenius segment revenues, is projected to continue. Radian Group maintains a strong capital position with $1.2 billion of total holding company liquidity, which includes the company's $267.5 million unsecured revolving credit facility. Courtesy of its solid financial strength, the multi-line insurer engages in capital deployment to enhance shareholder value. In May 2021, Radian Group approved a 12% dividend hike. Its current dividend yield of 2.4% is higher than the industry average of 2%. In August 2021, Radian Group approved a $200 million increase in its share buyback program, which will allow the company to spend up to $237 million to repurchase its common stock through Aug 31, 2022. Share repurchases drive the company’s earnings per share, book value and shareholder equity by reducing shares outstanding. Other Stocks to Consider
Some other top-ranked stocks from the insurance sector include
CNO Financial Group, Inc. ( CNO Quick Quote CNO - Free Report) , MGIC Investment Corporation ( MTG Quick Quote MTG - Free Report) and First American Financial Corporation ( FAF Quick Quote FAF - Free Report) . While CNO Financial and MGIC Investment sport a Zacks Rank #1, First American carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. The bottom line of CNO Financial surpassed estimates in three of the last four quarters and missed in the other one, the average being 26.12%. MGIC Investment surpassed estimates in each of the last four quarters, with the average surprise being 11.33%. First American’s earnings surpassed estimates in three of the last four quarters and missed in the other one, the average being 21.07%.