Estimates for Radian Group Inc. (RDN - Free Report) have been revised upward over the past 60 days, reflecting analysts’ confidence in the stock. The stock has seen the Zacks Consensus Estimate for 2018 bottom line being raised 8.1% to $2.54 and for 2019 earnings move 7.6% north to $2.69.
The company mainly offers mortgage and real estate products and services to its clients and carries a favorable VGM Score of B. Shares of this Zacks Rank #1 (Strong Buy) Multi line insurer have rallied nearly 19.3% in a year’s time against the industry’s 4.5% decline.
Radian Group’s extensive mortgage and real estate service portfolio, a persistent decline in claim payments, an improving risk-based capital ratio and a robust capital position should consistently drive favorable results in the near term.
Let’s focus on the factors that make Radian Group a stock to invest in for attractive returns.
Consistent Improvement in Mortgage Insurance in Force: Radian Group has been exhibiting continued improvement in the quality and size of its mortgage insurance portfolio, a major earnings driver, owing to the high volume of quality and profitable business written by the insurer. With increase in persistency, the company anticipates to see its insurance in force further rise in the near term that will help boost the insurer’s solid foundation for future earnings.
Notably, the company estimates approximately $55 million of the same (up from the previously guided volume of $50 million) in 2018.
Persistent Decline in Claim Payments: The Multi line insurer has been witnessing a decline in paid claims over a considerable period of time and on the back of solid credit characteristics of the new loans insured, fewer claims than before are expected to be seen.
Benefits of Business Restructuring: In order to focus more on core business and services having higher growth potential while ensuring better fee-based revenues, the company has been restructuring its business.
Also, the insurer remains focused on leveraging its core expertise in credit risk management pertaining to business opportunities. This in turn, will result in higher level of business written as well as boosting the Mortgage Insurance franchise.
Strong Capital Position: With respect to enhancing its capital position, the company has taken up quite a few initiatives that will help consolidating its capital structure through extension of debt maturities while strengthening financial flexibility.
Moreover, a sturdy capital position has enabled the company to add shareholder value through share buybacks. In fact, the company has approved a share buyback of worth $100 million through Jul 31, 2019.
Growth Projections: The Zacks Consensus Estimate for current-year earnings per share is pegged at $2.54, representing a significant year-over-year increase of about 39.6% and for 2019, the bottom line per share is pegged at $2.69, translating into a year-over-year rise of 5.9%.
Positive Earnings Surprise History: Radian Group’s surprise history depicts its diligent operational efficiency with the company having delivered positive surprises in all the last four quarters, the average beat being 10.54%.
Undervalued: Shares of Radian Group are trading at a price-to-book multiple of 1.39, noticeably lower than the industry average of 1.46. Price to book value ratio is the best multiple for valuing life insurers because of large variations in their earnings results from one quarter to the next. This ratio essentially measures a life insurer’s current market value, relative to what it would be worth if it chooses to shut down. Underpriced shares with solid fundamentals are lucrative bets. Moreover, the company carries an impressive Value Score of B. Our research shows that stocks with a commendable VGM Score of A or B when combined with a bullish Zacks Rank #1 (Strong Buy) or 2 (Buy), offer the best upside potential.
Other Stocks to Consider
Investors interested in other top-ranked stocks from the insurance industry can also consider The Progressive Corporation (PGR - Free Report) , NMI Holdings Inc. (NMIH - Free Report) and The Navigators Group, Inc. , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Progressive Corporation provides personal and commercial auto insurance, residential property insurance and other specialty property-casualty insurance plus related services, primarily in the United States. The company delivered positive surprises in all the preceding four quarters with an average earnings surprise of 9.19%.
NMI Holdings provides private mortgage guaranty insurance services in the United States. The company pulled off positive surprises in all the trailing four quarters with an average positive surprise of 29.85%.
Navigators Group underwrites marine, property and casualty plus professional liability insurance products and services in the United States and globally. The company came up with positive surprises in three of the previous four quarters with an average beat of 19.54%.
5 Medical Stocks to Buy Now
Zacks names 5 companies poised to ride a medical breakthrough that is targeting cures for leukemia, AIDS, muscular dystrophy, hemophilia, and other conditions.
New products in this field are already generating substantial revenue and even more wondrous treatments are in the pipeline. Early investors could realize exceptional profits.
Click here to see the 5 stocks >>