Shares of Radian Group Inc. RDN have rallied 32.9% in the past year, outperforming the industry’s 26.9% growth. The insurer also outperformed the Zacks S&P 500 composite and the Finance sector’s return of 30% and 30.9%, respectively, in the past year. With a market capitalization of $5.04 billion, the average volume of shares traded in the last three months was 1.03 million. Currently priced at $33.86, the stock is a little below its 52-week high of $37.86.
RDN Outperforms Industry, Sector, S&P in a Year
Image Source: Zacks Investment Research
The rally was largely driven by an improving mortgage insurance portfolio, declining claims, a solid capital position and effective capital deployment.
This multi-line insurer has a solid track record of beating earnings estimates in each of the last four quarters, the average being 17.65%.
RDN Trading Above 200-Day Moving Average
This Zacks Rank #2 (Buy) multi-line insurer is trading above its 200-day simple moving average (SMA) of $32.45, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.
RDN’s Return on Capital
Return on invested capital in the trailing 12 months was 7.8%, better than the industry average of 2.5%, reflecting RDN’s efficiency in utilizing funds to generate income.
Factors Acting in Favor of RDN
The insurer has intensified its focus on the core business and services with higher growth potential, ensuring a predictable and recurring fee-based revenue stream.
New business, combined with increasing annual persistency, should drive continued growth of the insurance-in-force portfolio. Radian’s mortgage insurance portfolio creates a strong foundation for future earnings.
Radian Group 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.
Radian Group expects that the private mortgage insurance market will be approximately $300 billion in 2024, consistent with the prior year. It expects a healthy purchase market in 2024, driven by ongoing homebuyer demand and an expected decline in interest rates, which is a positive for mortgage insurers. The company believes that the resulting pent-up demand provides strong support for future purchase volume, which drives the growth in large and valuable insurance in-force portfolio.
The multi-line insurer has been strengthening its capital position with capital contribution, reinsurance transactions and cash position. This, in turn, aids the insurer to engage in wealth distribution.
The 9% increase in quarterly dividend in the first quarter of 2024 marks the fifth consecutive year in which RDN has increased the quarterly dividend, with a total increase of 96% over the past four years. Its current dividend yield of 2.8% betters the industry average of 2.2%, making it an attractive pick for yield-seeking investors.
RDN Shares are Undervalued
Radian Group shares are trading at a price-to-book multiple of 1.08, lower than the industry average of 2.37.
Key Picks
Investors interested in the multi-line insurance industry may look at some better-ranked players like EverQuote, Inc. EVER, CNO Financial Group, Inc. CNO and Horace Mann Educators Corporation HMN, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for EverQuote’s 2024 and 2025 earnings implies year-over-year growth of 144.8% and 16.1%, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 149.58%. In the past year, shares of EVER have skyrocketed 124.8%.
The Zacks Consensus Estimate for CNO Financial’s 2024 and 2025 earnings implies year-over-year growth of 20.7% and 0.6%. It beat earnings estimates in three of the past four quarters while missing in one, with an average surprise of 24.51%. In the past year, shares of CNO have gained 51.4%.
The Zacks Consensus Estimate for Horace Mann’s 2024 and 2025 earnings implies year-over-year growth of 69.4% and 43.3%, respectively. It beat earnings estimates in two of the past four quarters, while matched in one and missed in one, with an average surprise of 4.57%. In the past year, shares of HMN have gained 24.6%.
Zacks' Research Chief Names "Stock Most Likely to Double"
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.
Free: See Our Top Stock And 4 Runners UpCNO Financial Group, Inc. (CNO) : Free Stock Analysis Report
Radian Group Inc. (RDN) : Free Stock Analysis Report
EverQuote, Inc. (EVER) : Free Stock Analysis Report
Horace Mann Educators Corporation (HMN) : Free Stock Analysis Report
To read this article on Zacks.com click here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
