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Here's Why Hold Strategy is Appropriate for Radian Group (RDN)
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Radian Group (RDN - Free Report) has been in investors’ good books on the back of higher persistency, strong NIW volume, improved guidance and sufficient liquidity.
Earnings Surprise History
Radian Group has a solid track record of beating earnings estimates in six of the last seven quarters.
Zacks Rank & Price Performance
Radian Group currently has a Zacks Rank #3 (Hold). In the past year, the stock has lost 13.7% compared with the industry’s decrease of 15.3%.
Image Source: Zacks Investment Research
Return on Equity
RDN’s return on equity for the trailing 12 months is 17.2%, better than the industry average of 9.2% and expanding 970 basis points year over year. This reflects efficiency in utilizing shareholders’ funds.
Style Score
Radian Group has a favorable VGM Score of A. VGM Score helps identify stocks with the most attractive value, the best growth and the most promising momentum.
Business Tailwinds
Continued high levels of the new mortgage insurance business, as well as an increase in persistency, are likely to drive the primary insurance in force (NIW), the main driver of future earnings for Radian Group.
Given the expected higher persistency and strong NIW volume, Radian Group expects insurance-in-force growth to remain at nearly 10%.
Rising interest rates in 2022 are expected to result in continued declines in refinance activity, which is expected to drive further increases in portfolio persistency. This in turn will contribute to growth in large, high-quality insurance in-force portfolio.
The solid performance across real estate services, asset management, and valuation products and services despite minimal foreclosure and real estate-owned activity is expected to boost the homegenius business segment.
An increase in interest rates is likely to result in higher reinvestment yields in the investment portfolio. Radian noted that per the recent market projections for 2022, Radian Group expects the private mortgage insurance market to be nearly $500 billion to $525 billion, indicating the third-largest MI volume year in history.
For 2022, RDN projects adjusted gross profit in the range of $70 million to $80 million and adjusted pre-tax operating income before corporate allocations in the bracket of $1 million to $5 million.
As of Mar 31, 2022, Radian Group maintained a strong capital position with $1.3 billion of total holding company liquidity. Radian Guaranty's excess PMIERs Available Assets over minimum required assets was $1.6 billion as of the end of the first quarter, which represents a 44% PMIERs cushion. Liquidity in the first quarter was enhanced by the $500 million return of capital from Radian Guaranty to Radian Group.
Riding on continued financial strength and flexibility, Radian declared a 43% increase in quarterly dividend in the first quarter of 2022 that translates into the highest dividend yield in the private MI industry. Its current dividend yield of 4.1% betters the industry average of 2.5%. The board approved a new two-year $400 million share buyback program.
The Zacks Consensus Estimate for RDN’s 2022 earnings per share is pegged at $3.60, indicating a year-over-year increase of 14.3%. The Zacks Consensus Estimate for 2022 has moved north by 2.8% in the past 60 days, reflecting analyst optimism.
Stocks to Consider
Some better-ranked stocks from the multi-line insurance industry are James River Group Holdings, Ltd. (JRVR - Free Report) , American International Group, Inc. (AIG - Free Report) and MGIC Investment Corporation (MTG - Free Report) . While James River Group sports a Zacks Rank #1 (Strong Buy), American International and MGIC Investment carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for James River Group’s 2022 and 2023 earnings implies 136% and 13.1% year-over-year growth, respectively.
The Zacks Consensus Estimate for JRVR’s 2022 and 2023 earnings has moved 15.1% and 4.9% north, respectively, in the past 60 days. In the past year, the insurer has declined 34.4%.
American International’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 18.9%. In the past year, AIG stock has rallied 5.3%.
The Zacks Consensus Estimate for American International’s 2022 and 2023 earnings implies 1.2% and 21.2% year-over-year growth, respectively.
MGIC Investment’s earnings surpassed estimates in each of the last four quarters, the average beat being 10.9%. In the past year, MTG has declined 10.7%.
The Zacks Consensus Estimate for MTG’s 2022 and 2023 earnings has moved 1.8% and 3.2% north, respectively, in the past 60 days.
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Here's Why Hold Strategy is Appropriate for Radian Group (RDN)
Radian Group (RDN - Free Report) has been in investors’ good books on the back of higher persistency, strong NIW volume, improved guidance and sufficient liquidity.
Earnings Surprise History
Radian Group has a solid track record of beating earnings estimates in six of the last seven quarters.
Zacks Rank & Price Performance
Radian Group currently has a Zacks Rank #3 (Hold). In the past year, the stock has lost 13.7% compared with the industry’s decrease of 15.3%.
Image Source: Zacks Investment Research
Return on Equity
RDN’s return on equity for the trailing 12 months is 17.2%, better than the industry average of 9.2% and expanding 970 basis points year over year. This reflects efficiency in utilizing shareholders’ funds.
Style Score
Radian Group has a favorable VGM Score of A. VGM Score helps identify stocks with the most attractive value, the best growth and the most promising momentum.
Business Tailwinds
Continued high levels of the new mortgage insurance business, as well as an increase in persistency, are likely to drive the primary insurance in force (NIW), the main driver of future earnings for Radian Group.
Given the expected higher persistency and strong NIW volume, Radian Group expects insurance-in-force growth to remain at nearly 10%.
Rising interest rates in 2022 are expected to result in continued declines in refinance activity, which is expected to drive further increases in portfolio persistency. This in turn will contribute to growth in large, high-quality insurance in-force portfolio.
The solid performance across real estate services, asset management, and valuation products and services despite minimal foreclosure and real estate-owned activity is expected to boost the homegenius business segment.
An increase in interest rates is likely to result in higher reinvestment yields in the investment portfolio. Radian noted that per the recent market projections for 2022, Radian Group expects the private mortgage insurance market to be nearly $500 billion to $525 billion, indicating the third-largest MI volume year in history.
For 2022, RDN projects adjusted gross profit in the range of $70 million to $80 million and adjusted pre-tax operating income before corporate allocations in the bracket of $1 million to $5 million.
As of Mar 31, 2022, Radian Group maintained a strong capital position with $1.3 billion of total holding company liquidity. Radian Guaranty's excess PMIERs Available Assets over minimum required assets was $1.6 billion as of the end of the first quarter, which represents a 44% PMIERs cushion. Liquidity in the first quarter was enhanced by the $500 million return of capital from Radian Guaranty to Radian Group.
Riding on continued financial strength and flexibility, Radian declared a 43% increase in quarterly dividend in the first quarter of 2022 that translates into the highest dividend yield in the private MI industry. Its current dividend yield of 4.1% betters the industry average of 2.5%. The board approved a new two-year $400 million share buyback program.
The Zacks Consensus Estimate for RDN’s 2022 earnings per share is pegged at $3.60, indicating a year-over-year increase of 14.3%. The Zacks Consensus Estimate for 2022 has moved north by 2.8% in the past 60 days, reflecting analyst optimism.
Stocks to Consider
Some better-ranked stocks from the multi-line insurance industry are James River Group Holdings, Ltd. (JRVR - Free Report) , American International Group, Inc. (AIG - Free Report) and MGIC Investment Corporation (MTG - Free Report) . While James River Group sports a Zacks Rank #1 (Strong Buy), American International and MGIC Investment carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for James River Group’s 2022 and 2023 earnings implies 136% and 13.1% year-over-year growth, respectively.
The Zacks Consensus Estimate for JRVR’s 2022 and 2023 earnings has moved 15.1% and 4.9% north, respectively, in the past 60 days. In the past year, the insurer has declined 34.4%.
American International’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 18.9%. In the past year, AIG stock has rallied 5.3%.
The Zacks Consensus Estimate for American International’s 2022 and 2023 earnings implies 1.2% and 21.2% year-over-year growth, respectively.
MGIC Investment’s earnings surpassed estimates in each of the last four quarters, the average beat being 10.9%. In the past year, MTG has declined 10.7%.
The Zacks Consensus Estimate for MTG’s 2022 and 2023 earnings has moved 1.8% and 3.2% north, respectively, in the past 60 days.