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

Shares of Radian Group Inc. RDN have gained 7.2% in the past year, outperforming its industry’s growth of 7.1%. It, however, underperformed the Finance sector and the Zacks S&P 500 composite’s growth of 15.8% and 8.1%, respectively. 

The insurer has a market capitalization of $4.43 billion. The average volume of shares traded in the last three months was 1.8 million. Radian Group’s bottom line surpassed earnings estimates in each of the last four quarters, the average being 17.42%.

RDN vs. Industry, Sector, S&P in One Year

RDN Shares are Affordable

RDN shares are trading at a price -to-book value of 0.96X, lower than the industry average of 2.49X. 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’s Growth Projection Encourages

The Zacks Consensus Estimate for 2025 revenues is pegged at $1.32 million, implying a year-over-year improvement of 5.8%. The estimate for 2026 earnings per share and revenues indicates an increase of 3.4% and 3%, respectively, from the corresponding 2025 estimates. 

Earnings have grown 10% in the past five years, better than the industry average of 9%. 

RDN’s Return on Capital

Return on invested capital in the trailing 12 months was 7.7%, better than the industry average of 2%, reflecting RDN’s efficiency in utilizing funds to generate income.

Factors Impacting RDN

Radian’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 contribution, reinsurance transaction and cash position. This helps Radian Group to engage in wealth distribution via dividend hikes and share buybacks.

Final Take on RDN

Radian Group expects the private mortgage insurance market to be approximately 10% bigger in 2025 than in 2024. A lower interest rate environment is positive for mortgage insurers. After three rate cuts in 2024, two more are expected this year. The company believes that the resulting pent-up demand provides strong support for future purchase volume, which drives the growth in the large and valuable insurance in-force portfolio.

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 3.2% betters the industry average of 2.7%, making it an attractive pick for yield-seeking investors.

Its solid growth projections as well as attractive valuations are other positives. The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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

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