Yahoo Finance Radian Group (RDN) Up 26.7% in a Year: Will the Rally Last?
Shares of Radian Group, Inc. RDN have gained 26.7% in the past year against the industry's decline of 9.3%. The Zacks S&P 500 composite has increased 7% in the said time frame. With market capitalization of $4.2 billion, average volume of shares traded in the last three months was 2.3 million.
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The rally was largely driven by improved persistency and mortgage insurance portfolio, robust capital position as well as prudent capital deployment.
The multi-line insurer has a solid track record of beating earnings estimates in each of the last four quarters, the average being 38.72%.
This Zacks Rank #2 (Buy) insurer is well-poised for progress, as is evident from its favorable VGM Score of B. VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum. Back-tested results have shown that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or #2, offer better returns.
Can It Retain the Momentum?
The Zacks Consensus Estimate for 2023 and 2024 has moved 6.5% and 1.6% north, respectively, in the past 30 days, reflecting analysts’ optimism on the stock.
RDN’s return on equity for the trailing 12 months is 19.9%, better than the industry average of 9.8%. The metric expanded 270 basis points year over year. This reflects its efficiency in utilizing shareholders’ funds.
Radian Group remains focused on improving its mortgage insurance portfolio, the main catalyst of long-term earnings growth and managing capital resources, the strategic value creation areas.
The growth in the purchase market is a positive for the mortgage insurance industry. Persistency should improve given higher mortgage interest rates.
Continued high levels of the new mortgage insurance business, as well as an increase in persistency, are likely to drive the primary insurance in force, the main driver of future earnings for Radian Group.
The insurer took a few initiatives that will consolidate its capital structure by extending debt maturities while enhancing financial flexibility. Currently, RDN had available, unrestricted cash and liquid investments of $956 million. The holding company liquidity includes the benefit from a $100 million ordinary dividend paid by Radian Guaranty. Also, the company has been effectively trying to lower its debt level over the last few years.
Radian Group maintains a solid balance sheet with sufficient liquidity and strong cash flows. A strong capital position helps the insurer deploy capital via share repurchases and dividend hikes that enhance shareholders value. Its current dividend yield of 3.3% is better than the industry average of 2.7%. The board had approved a new two-year $300 million share buyback program in January 2023. The remaining repurchase capacity was pegged at $280 million as of Mar 31, 2023.
RDN has an impressive Value Score of A. The insurer currently has a trailing 12-month P/B ratio of 1.02, lower than the industry range of 2.2. This style score helps find the most attractive value stocks.
Other Stocks to Consider
Some other top-ranked stocks from the multi-line insurance industry are American International Group, Inc. AIG, Assurant, Inc. AIZ and Old Republic International Corporation ORI, each sporting a Zacks Rank #1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
American International Group’s earnings surpassed estimates in three of the last four quarters and missed in one, the average earnings surprise being 9.22%.
The Zacks Consensus Estimate for AIG’s 2023 and 2024 earnings implies 44.6% and 19.7% year-over-year growth, respectively. In the past year, the insurer has lost 6.5%.
Assurant’s earnings surpassed estimates in three of the last four quarters and missed in one, the average earnings surprise being 18.1%.
The Zacks Consensus Estimate for AIZ’s 2023 and 2024 earnings implies 24.9% and 13.6% year-over-year growth, respectively. In the past year, the insurer has declined 32.6%.
Old Republic International’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 29.8%.
The Zacks Consensus Estimate for ORI’s 2023 and 2024 earnings has moved 9.1% and 6.4% north, respectively, in the past 60 days. In the past year, the insurer has gained 4.6%.
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American International Group, Inc. (AIG) : Free Stock Analysis Report
Assurant, Inc. (AIZ) : Free Stock Analysis Report
Radian Group Inc. (RDN) : Free Stock Analysis Report
Old Republic International Corporation (ORI) : Free Stock Analysis Report
