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Is it Time to Add Radian Group (RDN) Stock in Your Kitty Now?
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Radian Group’s (RDN - Free Report) improving mortgage insurance portfolio, declining claims, the well-performing homegenius segment, solid capital position, effective capital deployment, and favorable growth estimates make it worth adding to one’s portfolio.
RDN has a decent track record of beating earnings estimates in three of the last four quarters, while missing in one.
Zacks Rank & Price Performance
Radian Group currently sports a Zacks Rank #1 (Strong Buy). Quarter to date, the stock has gained 7.4% compared with the industry’s growth of 1.3%.
Image Source: Zacks Investment Research
Growth Projections
The Zacks Consensus Estimate for Radian Group’s 2022 earnings is pegged at $4.18, indicating a 32.7% increase from the year-ago reported figure. The expected long-term earnings growth rate is pegged at 5%.
Return on Equity
Return on equity was 17.2% in the trailing 12 months, better than the industry average of 9.3%.
Estimate Revision
The Zacks Consensus Estimate for 2022 and 2023 has moved 16.1% and 9.7% north in the past 30 days, reflecting analysts’ optimism.
Growth Drivers
An improved mortgage insurance portfolio, the main catalyst of long-term earnings growth, creates a strong foundation for Radian Group’s earnings. An increase in single premium policy insurance in force and a higher monthly premium policy should continue to benefit primary mortgage insurance in force.
Given an improved interest rate environment, refinance activity is likely to decline. This, in turn, is estimated to drive increases in portfolio persistency and boost insurance in force growth.
Banking on expected higher persistency and strong NIW volume, Radian Group expects insurance-in-force growth in 2022 to hover around 10%. For 2022, the company estimates total mortgage originations of $3 trillion, suggesting an 8% increase in purchase originations and a 58% decrease in refinance activity. This growth in the purchase market is a positive for the mortgage insurance industry. Radian Group expects the private mortgage insurance market to be $400 billion to $450 billion, which would represent the third-largest MI volume year in history.
RDN has been witnessing declining claims over the past few years. With the strong credit characteristics of the new loans insured, we expect fewer claims than before.
Strong performing real estate services, asset management, and valuation products and services despite minimal foreclosure and real estate-owned activity should drive the homegenius business segment.
Prudent Capital Deployment
Radian Group’s solid liquidity aids in effective capital deployment. A 43% increase in the quarterly dividend in the first quarter of 2022 translated into the highest dividend yield in the private MI industry. Its current dividend yield of 3.8% betters the industry average of 2.4%. RDN has $97.6 million remaining under its buyback authorization.
Attractive Valuation
RDN shares are trading at a discount than the industry average. Its price to book value of 0.93X is lower than the industry average of 1.65X. Before valuation expands, it is preferable to take a position in the stock. The company has a Value Score of B. Back-tested results have shown that stocks with a Value Score of A or B, combined with a Zacks Rank #1 or #2 (Buy), offers better returns.
The bottom line of Arch Capital surpassed earnings estimates in three of the last four quarters and missed in one, the average being 33.64%. In the past year, the insurer has rallied 15.4%.
The Zacks Consensus Estimate for Arch Capital’s 2022 and 2023 earnings has moved 5.7% and 4.9% north, respectively, in the past 30 days.
American Financial’s earnings surpassed estimates in each of the last four quarters, the average beat being 37.09%. In the past year, American Financial has lost 7.9%.
The Zacks Consensus Estimate for AFG’s 2022 and 2023 earnings has moved 3.1% and 3.3% north, respectively, in the past 30 days.
The bottom line of ProAssurance surpassed earnings estimates in three of the last four quarters and missed in one, the average being 150.9%. In the past year, the insurer has lost 15.6%.
The Zacks Consensus Estimate for ProAssurance’s 2022 and 2023 earnings has moved 25.9% and 13.9% north, respectively, in the past 30 days.
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Is it Time to Add Radian Group (RDN) Stock in Your Kitty Now?
Radian Group’s (RDN - Free Report) improving mortgage insurance portfolio, declining claims, the well-performing homegenius segment, solid capital position, effective capital deployment, and favorable growth estimates make it worth adding to one’s portfolio.
RDN has a decent track record of beating earnings estimates in three of the last four quarters, while missing in one.
Zacks Rank & Price Performance
Radian Group currently sports a Zacks Rank #1 (Strong Buy). Quarter to date, the stock has gained 7.4% compared with the industry’s growth of 1.3%.
Image Source: Zacks Investment Research
Growth Projections
The Zacks Consensus Estimate for Radian Group’s 2022 earnings is pegged at $4.18, indicating a 32.7% increase from the year-ago reported figure. The expected long-term earnings growth rate is pegged at 5%.
Return on Equity
Return on equity was 17.2% in the trailing 12 months, better than the industry average of 9.3%.
Estimate Revision
The Zacks Consensus Estimate for 2022 and 2023 has moved 16.1% and 9.7% north in the past 30 days, reflecting analysts’ optimism.
Growth Drivers
An improved mortgage insurance portfolio, the main catalyst of long-term earnings growth, creates a strong foundation for Radian Group’s earnings. An increase in single premium policy insurance in force and a higher monthly premium policy should continue to benefit primary mortgage insurance in force.
Given an improved interest rate environment, refinance activity is likely to decline. This, in turn, is estimated to drive increases in portfolio persistency and boost insurance in force growth.
Banking on expected higher persistency and strong NIW volume, Radian Group expects insurance-in-force growth in 2022 to hover around 10%. For 2022, the company estimates total mortgage originations of $3 trillion, suggesting an 8% increase in purchase originations and a 58% decrease in refinance activity. This growth in the purchase market is a positive for the mortgage insurance industry. Radian Group expects the private mortgage insurance market to be $400 billion to $450 billion, which would represent the third-largest MI volume year in history.
RDN has been witnessing declining claims over the past few years. With the strong credit characteristics of the new loans insured, we expect fewer claims than before.
Strong performing real estate services, asset management, and valuation products and services despite minimal foreclosure and real estate-owned activity should drive the homegenius business segment.
Prudent Capital Deployment
Radian Group’s solid liquidity aids in effective capital deployment. A 43% increase in the quarterly dividend in the first quarter of 2022 translated into the highest dividend yield in the private MI industry. Its current dividend yield of 3.8% betters the industry average of 2.4%. RDN has $97.6 million remaining under its buyback authorization.
Attractive Valuation
RDN shares are trading at a discount than the industry average. Its price to book value of 0.93X is lower than the industry average of 1.65X. Before valuation expands, it is preferable to take a position in the stock. The company has a Value Score of B. Back-tested results have shown that stocks with a Value Score of A or B, combined with a Zacks Rank #1 or #2 (Buy), offers better returns.
Other Stocks to Consider
Some other top-ranked stocks from the insurance industry are Arch Capital Group Ltd. (ACGL - Free Report) , American Financial Group, Inc. (AFG - Free Report) and ProAssurance Corporation (PRA - Free Report) , each sporting a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The bottom line of Arch Capital surpassed earnings estimates in three of the last four quarters and missed in one, the average being 33.64%. In the past year, the insurer has rallied 15.4%.
The Zacks Consensus Estimate for Arch Capital’s 2022 and 2023 earnings has moved 5.7% and 4.9% north, respectively, in the past 30 days.
American Financial’s earnings surpassed estimates in each of the last four quarters, the average beat being 37.09%. In the past year, American Financial has lost 7.9%.
The Zacks Consensus Estimate for AFG’s 2022 and 2023 earnings has moved 3.1% and 3.3% north, respectively, in the past 30 days.
The bottom line of ProAssurance surpassed earnings estimates in three of the last four quarters and missed in one, the average being 150.9%. In the past year, the insurer has lost 15.6%.
The Zacks Consensus Estimate for ProAssurance’s 2022 and 2023 earnings has moved 25.9% and 13.9% north, respectively, in the past 30 days.