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Radian (RDN) Rallies 52% in a Year: More Room for Growth?
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Radian Group’s (RDN - Free Report) shares have rallied 51.6% in a year, outperforming the industry’s increase of 1.5%. The Finance sector has risen 13.4% and the Zacks S&P 500 index has gained 24.3% in the said time frame. With a market capitalization of $4.4 billion, the average volume of shares traded in the last three months was 1.3 million.
Improving mortgage insurance portfolio, declining claims, the well-performing homegenius segment, a solid capital position and effective capital deployment continue to drive this Zacks Rank #3 (Hold) insurer.
The insurer’s earnings have increased 19% in the past five years, better than the industry average of 4.5%. RDN has a solid surprise history, beating earnings estimates in each of the last eight reported quarters.
Return on invested capital (ROIC) was more than 10% in the last two years. The company has raised its capital investment over some time. A stable ROIC reflects its efficiency in managing its investments to generate income.
Image Source: Zacks Investment Research
Will the Bull Run Continue?
The Zacks Consensus Estimate for RDN’s 2024 earnings is pegged at $3.33 per share on revenues of $1.2 billion. The expected long-term earnings growth rate is pegged at 5%.
Radian’s improved mortgage insurance portfolio, the main catalyst of long-term earnings growth, creates a strong foundation for its earnings. Primary mortgage insurance in force should benefit from an increase in single premium policy insurance in force and a higher monthly premium policy.
Lower refinance activity, due to an increase in mortgage interest rates, is favoring the persistency rate. Given the increase in market mortgage interest rates, Radian expects a continued positive impact on persistency rates.
Radian’s claims have been declining over the past few years. With the strong credit characteristics of the new loans insured, we expect the company to witness a lesser number of claims.
A decline in industry-wide mortgage and real estate transaction volume, inflationary pressure and a higher interest rate environment are affecting homegenius title and real estate businesses. Nonetheless, disciplined cost management should help navigate through this challenging environment.
Banking on operational excellence, the insurer maintains a solid balance sheet with sufficient liquidity and strong cash flows.
Radian Group’s solid liquidity aids in effective capital deployment. RDN has increased dividends for four straight years and boasts the highest dividend yield in the private MI industry. Its current dividend yield of 3.5% is better than the industry average of 2.7%. Radian has $280 million remaining under its buyback authorization.
The Zacks Consensus Estimate for HIG’s 2024 earnings indicates an increase of 19.6% from the 2023 estimated figure and has moved 0.6% north in the past 60 days. HIG delivered a four-quarter average earnings surprise of 10.81%. Shares gained 4.9% in a year.
Enact delivered a four-quarter average earnings surprise of 21.82%. In a year, ACT’s shares have gained 17.7%. The Zacks Consensus Estimate for ACT’s 2024 earnings has moved 1.1% higher in the past 60 days.
MGIC Investment delivered a four-quarter average earnings surprise of 28.59%. In a year, MTG’s shares have gained 52.7%. The Zacks Consensus Estimate for MTG’s 2024 earnings has moved north by 1 cent in the past 30 days.
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Radian (RDN) Rallies 52% in a Year: More Room for Growth?
Radian Group’s (RDN - Free Report) shares have rallied 51.6% in a year, outperforming the industry’s increase of 1.5%. The Finance sector has risen 13.4% and the Zacks S&P 500 index has gained 24.3% in the said time frame. With a market capitalization of $4.4 billion, the average volume of shares traded in the last three months was 1.3 million.
Improving mortgage insurance portfolio, declining claims, the well-performing homegenius segment, a solid capital position and effective capital deployment continue to drive this Zacks Rank #3 (Hold) insurer.
The insurer’s earnings have increased 19% in the past five years, better than the industry average of 4.5%. RDN has a solid surprise history, beating earnings estimates in each of the last eight reported quarters.
Return on invested capital (ROIC) was more than 10% in the last two years. The company has raised its capital investment over some time. A stable ROIC reflects its efficiency in managing its investments to generate income.
Image Source: Zacks Investment Research
Will the Bull Run Continue?
The Zacks Consensus Estimate for RDN’s 2024 earnings is pegged at $3.33 per share on revenues of $1.2 billion. The expected long-term earnings growth rate is pegged at 5%.
Radian’s improved mortgage insurance portfolio, the main catalyst of long-term earnings growth, creates a strong foundation for its earnings. Primary mortgage insurance in force should benefit from an increase in single premium policy insurance in force and a higher monthly premium policy.
Lower refinance activity, due to an increase in mortgage interest rates, is favoring the persistency rate. Given the increase in market mortgage interest rates, Radian expects a continued positive impact on persistency rates.
Radian’s claims have been declining over the past few years. With the strong credit characteristics of the new loans insured, we expect the company to witness a lesser number of claims.
A decline in industry-wide mortgage and real estate transaction volume, inflationary pressure and a higher interest rate environment are affecting homegenius title and real estate businesses. Nonetheless, disciplined cost management should help navigate through this challenging environment.
Banking on operational excellence, the insurer maintains a solid balance sheet with sufficient liquidity and strong cash flows.
Radian Group’s solid liquidity aids in effective capital deployment. RDN has increased dividends for four straight years and boasts the highest dividend yield in the private MI industry. Its current dividend yield of 3.5% is better than the industry average of 2.7%. Radian has $280 million remaining under its buyback authorization.
Stocks to Consider
Some better-ranked stocks from the insurance industry are The Hartford Financial Services Group (HIG - Free Report) , Enact Holdings (ACT - Free Report) and MGIC Investment (MTG - Free Report) , each carrying Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for HIG’s 2024 earnings indicates an increase of 19.6% from the 2023 estimated figure and has moved 0.6% north in the past 60 days. HIG delivered a four-quarter average earnings surprise of 10.81%. Shares gained 4.9% in a year.
Enact delivered a four-quarter average earnings surprise of 21.82%. In a year, ACT’s shares have gained 17.7%. The Zacks Consensus Estimate for ACT’s 2024 earnings has moved 1.1% higher in the past 60 days.
MGIC Investment delivered a four-quarter average earnings surprise of 28.59%. In a year, MTG’s shares have gained 52.7%. The Zacks Consensus Estimate for MTG’s 2024 earnings has moved north by 1 cent in the past 30 days.