Radian Group, Inc. (RDN - Free Report) is poised for growth, given its strong mortgage insurance portfolio, decline in levels of paid claims and robust capital position.
Radian Group continues to expect growth in future earnings driven by its mortgage insurance portfolio, which increased 26% year over year in 2019. Increased persistency and focus on improving the mortgage insurance portfolio are expected to enhance the company’s earnings.
Also, decline in claim payments over the past few years indicates an improved operating environment. In 2019, net claims paid declined 38.8% from the prior-year figure.
Radian boasts a solid capital position indicating its financial strength and financial flexibility. In February 2020, the company hiked its quarterly dividend to 125 cents per share from its prior dividend payout of 25 cents. The dividend raise was supported by the company’s strong capital structure.
Its healthy balance sheet with unparalleled financial flexibility allows investment in business. Also, the current share buyback plan of $200 million was raised to $475 million, extending the program till August 2021.
However, rising expenses due to increase in provision for loss, policy acquisition costs, cost of services, other operating expenses are likely to weigh on operating margin. In 2019, expenses increased 15.1% from the year-ago period.
Estimates for Radian Group have been revised upward over the past seven days, reflecting analysts’ confidence in the stock. The Zacks Consensus Estimate for 2020 earnings per share has moved 0.3% north while that for 2021 has moved up 0.6% in the said time frame.
The company also has a decent history of beating estimates in each of the last four quarters with the average beat being 11.83%.
The Zacks Consensus Estimate for 2021 earnings per share is pegged at $3.36, indicating increase of nearly 4.7% from the year-ago reported figure. The expected long-term earnings growth rate is 5%.
Shares of Radian Group have lost 8.4% in the past year, compared with the industry’s decline of 19.7%.
This mortgage insurers’ return on equity was 17.4% in the trailing 12-month period, higher than the industry average of 8.8%. Return on equity is a profitability measure that identifies the company’s efficiency in utilizing its shareholders’ funds.
This Zacks Rank #2 (Buy) stock carries a favorable Value Score of B. Back-tested results show that stocks with a Value Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 are best investment options.
It has a favorable Growth Score of B. This style score identifies growth prospects of a company.
Other Stocks to Consider
Some other top-ranked stocks from the space include Kemper Corp. KMPR, James River Group Holdings, Ltd. (JRVR - Free Report) and Cincinnati Financial Corp. (CINF - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Kemper Corp. surpassed estimates in three of the last four quarters, the positive surprise being 12.38%, on average.
James River Group surpassed estimates in three of the last four quarters, the positive surprise being 12.36%, on average.
Cincinnati Financial surpassed estimates in three of the last four quarters, the positive surprise being 17.86%, on average.
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