Radian Outperforms Industry, Trades at Discount: How to Play the Stock

Shares of Radian Group Inc. RDN have gained 9.3% in the year-to-date period, outperforming its industry, the Finance sector, and the Zacks S&P 500 composite’s growth of 2.6%, 9.1% and 8.3%, respectively. 

The insurer has a market capitalization of $4.69 billion. The average volume of shares traded in the last three months was 1.2 million.

RDN Shares are Affordable

RDN shares are trading at a price-to-book value of 1.05X, lower than the industry average of 2.05X, the Finance sector’s 4.23X, and the Zacks S&P 500 Composite’s 8.2X. Its pricing, at a discount to the industry average, gives a better entry point for investors. Shares of other insurers like Assurant, Inc. AIZ, Enact Holdings, Inc. ACT, and CNO Financial Group, Inc. CNO are also trading at a discount to the industry average.

RDN Trading Above 50-Day and 200-Day Moving Averages

Shares of Radian closed at $34.66 on Aug. 12, near its 52-week high of $36.99. This proximity underscores investor confidence. It has the ingredients for further price appreciation. The stock is trading above the 50-day and 200-day simple moving averages (SMA) of $34.35 and $33.37, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.

RDN’s Encouraging Growth Projections

The Zacks Consensus Estimate for Radian Group’s 2025 revenues is pegged at $1.25 billion, implying a year-over-year improvement of 0.2%.

The consensus estimate for 2026 earnings per share and revenues indicates an increase of 0.3% and 2.6%, respectively, from the corresponding 2025 estimates.

Radian Group has a solid surprise history. The multi-line insurer has a solid track record of beating earnings estimates in each of the last four quarters, with an average being 11.15%.

Optimistic Analyst Sentiment on RDN

Each of the two analysts covering the stock has raised estimates for 2025, and one analyst has raised the same for 2026 over the past 30 days. Thus, the Zacks Consensus Estimate for 2025 and 2026 moved 3.7% and 1.2% north, respectively, in the last 30 days.

Average Target Price for RDN Suggests Upside

Based on short-term price targets offered by six analysts, the Zacks average price target is $37.00 per share. The average suggests a potential 8.2% upside from the last closing price.

RDN’s Favorable Return on Capital

Return on invested capital (ROIC) has been increasing over the last few quarters while the company raised its capital investment over the same time frame. This reflects RDN’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 6.8%, better than the industry average of 1.9%.

Key Points to Note for RDN

Radian Group’s heightened focus on the core business and services with higher growth potential ensures 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 Group’s mortgage insurance portfolio creates a strong foundation for future earnings. RDN has been witnessing a declining pattern of claim filings. We expect paid claims to decline further, thus strengthening the balance sheet and improving its financial profile.

This mortgage insurer has been strengthening its capital position with capital contributions, reinsurance transactions, and cash position. This helps Radian Group engage in wealth distribution via dividend hikes and share buybacks.

Conclusion

Based on recent industry forecasts, Radian expects the private mortgage insurance market in 2025 to be approximately $300 billion, in line with recent years. Improving mortgage insurance portfolio, declining claims, a solid capital position, and effective capital deployment should continue to favor mortgage insurers over the long term. 

The 4.1% increase in quarterly dividend in the first quarter of 2025 marks the sixth consecutive year. RDN has increased the quarterly dividend, which has more than doubled over the past five years. Its current dividend yield of 2.8% betters the industry average of 2.5%, making it an attractive pick for yield-seeking investors.

Its solid growth projections as well as attractive valuations are other positives. Coupled with optimistic analyst sentiment and favorable ROIC, the time appears right for potential investors to bet on this Zacks Rank #2 (Buy) insurer. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research