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Here's Why You Should Add Radian Group (RDN) in Your Portfolio
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Radian Group Inc. (RDN - Free Report) is poised to grow on the back of an improving mortgage insurance portfolio, declining claims, higher interest rates, a solid capital position and effective capital deployment.
Northbound Estimate Revision
The Zacks Consensus Estimate for 2024 earnings has moved up nearly 7.6% in the past 30 days, reflecting investors’ optimism.
Earnings Surprise History
Radian Group has a decent earnings surprise history. It surpassed estimates in each of the last four quarters, the average being 22.79%.
Zacks Rank & Price Performance
RDN currently carries a Zacks Rank #2 (Buy). The stock has gained 22% compared with the industry’s growth of 26.3% in the past year.
Image Source: Zacks Investment Research
Attractive Valuation
Radian Group’s shares are trading at a price-to-book value multiple of 1.07, which is lower than the industry average of 2.59. It also has a Value Score of B. This style score helps find the most attractive value stocks. Back-tested results have shown that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer better returns.
Business Tailwinds
Based on projections of private mortgage insurance penetration in the overall insurable mortgage market, Radian Group expects the private mortgage insurance market to be approximately $300 billion in 2024. Management anticipates a healthy purchase market in 2024, driven by ongoing homebuyer demand and an expected decline in interest rates, which are positives for mortgage insurers.
This mortgage insurer has been witnessing an increase in new business written. High-quality new insurance written, combined with strong portfolio persistency, contributed to the growth of a large and valuable insurance in-force portfolio. Higher interest rates benefited the persistency rate of the existing insurance in force. With strong persistency rates and the current positive industry pricing environment, the company expects in-force portfolio premium yield to remain stable for the remainder of 2024.
RDN has been witnessing a declining pattern of claim filings. Thus, we expect paid claims to decrease further. A decline in loss and claims will strengthen the balance sheet and hence improve its financial profile.
The company enjoys a solid capital position, banking on capital contribution, reinsurance transactions and cash position. This, in turn, aids the mortgage insurer to engage in capital payout. Riding on continued financial strength and flexibility, Radian Group declared a 9% increase in quarterly dividend in the first quarter of 2024. This is the fifth consecutive year where RDN has hiked the quarterly dividend with a total increase of 96% over the past four years. It also has $117 million remaining under its buyback authorization.
Also, the return on invested capital in the trailing 12 months was 8.3%, which was better than the industry average of 2%. It reflects RDN’s efficiency in utilizing funds to generate income.
The Zacks Consensus Estimate for Radian Group’s 2024 revenues is pegged at $1.29 billion, implying a year-over-year improvement of 8.2%. The consensus estimate for 2025 revenues indicates an increase of 4.9% from the corresponding 2024 estimate.
Style Score
RDN has a VGM Score of B. VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum.
Lemonade has a solid track record of beating earnings estimates in each of the trailing four quarters, the average being 12.82%. In the past year, shares of RDN have plunged 76.5%.
The Zacks Consensus Estimate for LMND’s 2024 and 2025 revenues implies year-over-year growth of 13.8% and 18.4%, respectively.
Old Republic International has a solid track record of beating earnings estimates in three of the last four quarters while missing in one, the average being 6.61%. In the past year, shares of ORI have climbed 39.6%.
The Zacks Consensus Estimate for ORI’s 2024 and 2025 revenues implies year-over-year growth of 3.8% and 4.4%, respectively.
EverQuote has a solid track record of beating earnings estimates in each of the trailing four quarters, the average being 65.16%. In the past year, shares of EVER have skyrocketed 119.1%.
The Zacks Consensus Estimate for EVER’s 2024 and 2025 revenues implies year-over-year growth of 98% and 550%, respectively.
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Here's Why You Should Add Radian Group (RDN) in Your Portfolio
Radian Group Inc. (RDN - Free Report) is poised to grow on the back of an improving mortgage insurance portfolio, declining claims, higher interest rates, a solid capital position and effective capital deployment.
Northbound Estimate Revision
The Zacks Consensus Estimate for 2024 earnings has moved up nearly 7.6% in the past 30 days, reflecting investors’ optimism.
Earnings Surprise History
Radian Group has a decent earnings surprise history. It surpassed estimates in each of the last four quarters, the average being 22.79%.
Zacks Rank & Price Performance
RDN currently carries a Zacks Rank #2 (Buy). The stock has gained 22% compared with the industry’s growth of 26.3% in the past year.
Image Source: Zacks Investment Research
Attractive Valuation
Radian Group’s shares are trading at a price-to-book value multiple of 1.07, which is lower than the industry average of 2.59. It also has a Value Score of B. This style score helps find the most attractive value stocks. Back-tested results have shown that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer better returns.
Business Tailwinds
Based on projections of private mortgage insurance penetration in the overall insurable mortgage market, Radian Group expects the private mortgage insurance market to be approximately $300 billion in 2024. Management anticipates a healthy purchase market in 2024, driven by ongoing homebuyer demand and an expected decline in interest rates, which are positives for mortgage insurers.
This mortgage insurer has been witnessing an increase in new business written. High-quality new insurance written, combined with strong portfolio persistency, contributed to the growth of a large and valuable insurance in-force portfolio. Higher interest rates benefited the persistency rate of the existing insurance in force. With strong persistency rates and the current positive industry pricing environment, the company expects in-force portfolio premium yield to remain stable for the remainder of 2024.
RDN has been witnessing a declining pattern of claim filings. Thus, we expect paid claims to decrease further. A decline in loss and claims will strengthen the balance sheet and hence improve its financial profile.
The company enjoys a solid capital position, banking on capital contribution, reinsurance transactions and cash position. This, in turn, aids the mortgage insurer to engage in capital payout. Riding on continued financial strength and flexibility, Radian Group declared a 9% increase in quarterly dividend in the first quarter of 2024. This is the fifth consecutive year where RDN has hiked the quarterly dividend with a total increase of 96% over the past four years. It also has $117 million remaining under its buyback authorization.
Also, the return on invested capital in the trailing 12 months was 8.3%, which was better than the industry average of 2%. It reflects RDN’s efficiency in utilizing funds to generate income.
The Zacks Consensus Estimate for Radian Group’s 2024 revenues is pegged at $1.29 billion, implying a year-over-year improvement of 8.2%. The consensus estimate for 2025 revenues indicates an increase of 4.9% from the corresponding 2024 estimate.
Style Score
RDN has a VGM Score of B. VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum.
Other Stocks to Consider
Some other top-ranked stocks from the multi-line insurance industry are Lemonade, Inc. (LMND - Free Report) , Old Republic International Corporation (ORI - Free Report) and EverQuote, Inc. (EVER - Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Lemonade has a solid track record of beating earnings estimates in each of the trailing four quarters, the average being 12.82%. In the past year, shares of RDN have plunged 76.5%.
The Zacks Consensus Estimate for LMND’s 2024 and 2025 revenues implies year-over-year growth of 13.8% and 18.4%, respectively.
Old Republic International has a solid track record of beating earnings estimates in three of the last four quarters while missing in one, the average being 6.61%. In the past year, shares of ORI have climbed 39.6%.
The Zacks Consensus Estimate for ORI’s 2024 and 2025 revenues implies year-over-year growth of 3.8% and 4.4%, respectively.
EverQuote has a solid track record of beating earnings estimates in each of the trailing four quarters, the average being 65.16%. In the past year, shares of EVER have skyrocketed 119.1%.
The Zacks Consensus Estimate for EVER’s 2024 and 2025 revenues implies year-over-year growth of 98% and 550%, respectively.