Radian (RDN) Shows Potential to Grow: Apt to Buy the Stock?

Radian Group Inc. RDN is poised for growth, given its declining delinquency, lower levels of paid claims and improvement in mortgage portfolio. The company has been witnessing upward estimate revisions over the past 60 days. This Zacks Rank #2 (Buy) multiline insurer remains promising, banking on several growth prospects.

Northbound Estimates: The stock has seen the Zacks Consensus Estimate for both current-year and 2018 earnings being revised 3 cents upward over the last 60 days.

Price Outperformance: Shares of Radian have rallied 43.7% in a year, outperforming the industry’s growth of 11.9%. The stock has also outperformed the S&P 500 index’s 18.5% gain during the period.

 

Positive Earnings Surprise History: Radian has surpassed the Zacks Consensus Estimate in three of the last four quarters with an average beat of 4.52%.

Growth Projections: The Zacks Consensus Estimate for earnings per share is pegged at $1.76 for 2017 and $1.93 for 2018, translating to a year-over-year increase of 12.8% and 9.7%, respectively.

Radian has expected long-term earnings per share growth of 5%.

Growth Drivers in Place

Radian Group is restructuring its business by intensifying focus on core business and services with higher-growth potential and ensuring more predictable and recurring fee-based revenues. Recently, the company divested its Clayton EuroRisk to a global investment firm.

Radian is focused on improving its mortgage insurance portfolio, the main catalyst to long-term earnings growth. The company remains committed toward leveraging its core expertise in credit risk management, which will lead to more business written and strengthen the Mortgage Insurance franchise.

Improving mortgage insurance portfolio lays a strong foundation for future earnings growth. With projected increase in persistency, Radian expects insurance in force to rise in 2017. This in turn will boost earnings.

Radian Group anticipates about $50 billion new mortgage insurance written in 2017. The company also expects purchase originations to be nearly 10% higher in 2017 in comparison to that of 2016.

Claims’ payments have also been declining over the last few years. The company expects claims paid for 2017 to range between $300 million and $325 million.

Other Stocks to Consider

Investors interested in the same space can also look at other top-ranked stocks like MGIC Investment Corporation MTG, MetLife, Inc. MET and Prudential Financial Inc. PRU.

MGIC Investment provides private mortgage insurance and ancillary services to lenders and government sponsored entities in the United States. The company delivered an average four-quarter positive surprise of 2.17%. The stock flaunts a Zacks Rank #1 (Strong Buy) .You can see the complete list of today’s Zacks #1 Rank stocks here.
 
MetLife provides life insurance, annuities, employee benefits and asset management products in the United States, Japan, Latin America, Asia, Europe and the Middle East.  The company pulled off an average four-quarter beat of 9.60%. The stock carries a Zacks Rank of 2.

Prudential provides insurance, investment management and other financial products and services in the United States and internationally. The company came up with an average four-quarter positive surprise of 0.16%. The stock is a Zacks #2 Ranked player.

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Radian Group Inc. (RDN) : Free Stock Analysis Report
 
MetLife, Inc. (MET) : Free Stock Analysis Report
 
MGIC Investment Corporation (MTG) : Free Stock Analysis Report
 
Prudential Financial, Inc. (PRU) : Free Stock Analysis Report
 
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