This mortgage insurer has beaten analysts’ EPS estimates for the last four quarters, topping last quarter’s forecasts by eight cents.
Radian Group Inc. (RDN)
From Upside
While Radian Group Inc. (RDN) may sound like a tech stock, the company is a leading provider of private mortgage insurance and risk-management solutions to lenders. The company also offers title services and real estate brokerage solutions.
At the end of September, primary insurance-in-force totaled $237 billion, up 9% from a year earlier. Radian is benefiting from robust mortgage originations, particularly from first-time buyers.
The company boasts an Overall score of 98, reflecting scores above 90 for Momentum and Financial Strength. The Value score is 88, placing Radian among the cheapest 12% of U.S.-traded stocks.
Radian offers excellent operating momentum, highlighted by accelerating revenue growth, healthy cash-flow trends, and 10 straight quarters of double-digit growth in per-share profits. Operating cash flow increased 9% in the 12 months ended September, while free cash flow rose 9% to $664 million. For 2019, per-share earnings are expected to advance 16% to $3.11.
For 2020, the consensus is $3.21 per share, up from the $3.16 expected two months ago. The stock trades at eight times trailing earnings, below its five-year norm of 11, the industry median
of 14, and the sector median of 13. We are starting coverage of Radian as Buy.
Richard J. Moroney, CFA, Upside, www.upsidestocks.com, 800-233-5922, January 6, 2020