Radian Group (RDN) has drawn fresh attention after recent share performance, with the stock roughly flat over the past week but showing a decline over the month and past 3 months. Investors are reassessing its mortgage insurance profile.
See our latest analysis for Radian Group.
At a share price of $32.97, Radian Group’s recent 30 day and 90 day share price returns of 3.79% and 10.09% declines suggest fading short term momentum, even as the 3 year total shareholder return of 66.60% points to a stronger longer term story.
If this kind of insurance driven performance has your attention, it can be worth widening the lens to other areas of the market and seeing what stands out in 20 top founder-led companies
With Radian Group posting US$1,197.084m in revenue, US$618.179m in net income and trading at US$32.97 with what looks like a steep modelled intrinsic discount, is there a genuine buying opportunity here, or is the market already pricing in future growth?
Price to earnings of 7.3x: Is it justified?
On a P/E of 7.3x at a share price of $32.97, Radian Group screens as undervalued compared with its own modelled fair level and with peers, according to the data provided.
The P/E multiple reflects how much investors are paying for each dollar of current earnings, which matters for a mortgage insurer where profit quality and consistency are in focus. With Radian Group described as having high quality earnings and posting US$618.179m in net income on US$1,197.084m in revenue, a single digit P/E suggests the market is assigning a relatively low price tag to those profits.
Compared with the US Diversified Financial industry average P/E of 17.9x and a peer average of 8.2x, Radian Group’s 7.3x figure sits at a clear discount. The stock is also described as good value against an estimated fair P/E of 12.5x. This indicates a level the market could move towards if sentiment and assumptions align more closely with that fair ratio.
Explore the SWS fair ratio for Radian Group
Result: Price-to-earnings of 7.3x (UNDERVALUED)
However, you also have to weigh mortgage credit cycle risk, along with any shift in US housing conditions that could quickly change the outlook for Radian’s earnings power.
Find out about the key risks to this Radian Group narrative.
Another view from our DCF model
The SWS DCF model presents a much stronger picture, with an estimated future cash flow value of $111.98 versus today’s $32.97 share price. That implies Radian Group is trading well below this modelled value, raising the question of whether the cash flow assumptions are too optimistic or the market is too cautious.
Before relying on that gap, it is worth stress testing what would need to go right on earnings, housing conditions, and credit performance for the SWS DCF model to play out in full. It is also important to consider what this would mean for your risk tolerance if it does not. Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Radian Group for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 55 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
Balancing clear upside signals with real risks can feel challenging. It helps to check the numbers yourself and decide where you stand. If you want a concise view of both sides of the story, take a look at the 4 key rewards and 1 important warning sign
Looking for more investment ideas?
If Radian Group has sharpened your focus, do not stop here. Use the same structured approach to surface fresh opportunities that fit your own risk and return preferences.
- Target potential value opportunities by scanning companies that currently screen as 55 high quality undervalued stocks based on key financial metrics and quality checks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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