You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
RDN Stock Near 52-Week High: Should You Consider Investing Now?
Read MoreHide Full Article
Shares of Radian Group (RDN - Free Report) closed at $35.15 on Tuesday, near its 52-week high of $37.86. Improving mortgage insurance portfolio, declining claims, a well-performing homegenius segment, a solid capital position and effective capital deployment are driving the price higher.
Radian Group continued to benefit from positive credit performance in the mortgage insurance portfolio. With strong persistency rates and the current positive industry pricing environment, RDN expects in-force portfolio premium yield to remain stable.
Shares have gained 23.2% year to date, outperforming the industry’s increase of 16.4%, the Finance sector’s rise of 14.3% and the Zacks S&P 500 composite’s increase of 18.1% in the said time frame.
RDN Outperforms Industry, Sector, S&P 500 YTD
Image Source: Zacks Investment Research
RDN shares are trading well above the 50-day moving average, indicating a bullish trend.
Both the analysts covering the stock raised estimates for the current and next year. The Zacks Consensus Estimate for RDN’s 2024 and 2025 earnings has moved 6.5% and 1.7% north, respectively, in the past 60 days, reflecting analyst optimism.
RDN’s Return on Capital
Return on invested capital in the trailing 12 months was 8.2%, better than the industry average of 2.4%, reflecting RDN’s efficiency in utilizing funds to generate income.
Factors Acting in Favor of Radian
The company 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.
RDN 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.
The insurer has been strengthening its capital position with capital contribution, reinsurance transaction and cash position. This, in turn, aids the insurer to engage in wealth distribution.
RDN Shares Are Undervalued
RDN shares are trading at a price-to-book multiple of 1.18, lower than the industry average of 2.60. Its pricing at a discount to the industry average gives a better entry point to investors.
Shares of other insurers like MGIC Investment Corporation (MTG - Free Report) are trading at a multiple lower than the industry average, while that of Arch Capital Group (ACGL - Free Report) are trading at a multiple higher than the industry average.
Parting Thoughts
Radian 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 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 2.7% betters the industry average of 2.5%, making it an attractive pick for yield-seeking investors.
Given its attractive valuation, this Zacks Rank #2 (Buy) mortgage insurer is a strong contender for addition to one’s portfolio.
Shares of Radian Group (RDN - Free Report) closed at $35.15 on Tuesday, near its 52-week high of $37.86. Improving mortgage insurance portfolio, declining claims, a well-performing homegenius segment, a solid capital position and effective capital deployment are driving the price higher.
Radian Group continued to benefit from positive credit performance in the mortgage insurance portfolio. With strong persistency rates and the current positive industry pricing environment, RDN expects in-force portfolio premium yield to remain stable.
Shares have gained 23.2% year to date, outperforming the industry’s increase of 16.4%, the Finance sector’s rise of 14.3% and the Zacks S&P 500 composite’s increase of 18.1% in the said time frame.
RDN Outperforms Industry, Sector, S&P 500 YTD
Image Source: Zacks Investment Research
RDN shares are trading well above the 50-day moving average, indicating a bullish trend.
RDN’s Northbound Estimate Revision Instills Confidence
Both the analysts covering the stock raised estimates for the current and next year. The Zacks Consensus Estimate for RDN’s 2024 and 2025 earnings has moved 6.5% and 1.7% north, respectively, in the past 60 days, reflecting analyst optimism.
RDN’s Return on Capital
Return on invested capital in the trailing 12 months was 8.2%, better than the industry average of 2.4%, reflecting RDN’s efficiency in utilizing funds to generate income.
Factors Acting in Favor of Radian
The company 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.
RDN 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.
The insurer has been strengthening its capital position with capital contribution, reinsurance transaction and cash position. This, in turn, aids the insurer to engage in wealth distribution.
RDN Shares Are Undervalued
RDN shares are trading at a price-to-book multiple of 1.18, lower than the industry average of 2.60. Its pricing at a discount to the industry average gives a better entry point to investors.
Shares of other insurers like MGIC Investment Corporation (MTG - Free Report) are trading at a multiple lower than the industry average, while that of Arch Capital Group (ACGL - Free Report) are trading at a multiple higher than the industry average.
Parting Thoughts
Radian 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 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 2.7% betters the industry average of 2.5%, making it an attractive pick for yield-seeking investors.
Given its attractive valuation, this Zacks Rank #2 (Buy) mortgage insurer is a strong contender for addition to one’s portfolio.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.