Shares of Radian Group Inc. RDN are trading at a discount compared with the industry. Its 12-month trailing price-to-book value of 1.04X is lower than the industry average of 2.96X, the Finance sector’s 4.47X and the Zacks S&P 500 composite’s 8.13X. The insurer has a Value Score of A.
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The insurer has a market capitalization of $5 billion. The average volume of shares traded in the last three months was 1.3 million. The insurer has a solid track record of beating earnings estimates in each of the last four quarters, with an average of 10.7%.
Shares of MGIC Investment Corporation MTG, Assurant, Inc. AIZ, and Old Republic International Corporation ORI are also trading at a discount to the industry average.
RDN’s Price Performance
Shares of Radian Group have gained 13.9% in the past six months compared with the industry’s growth of 7.7%.
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Average Target Price for RDN Suggests Upside
Based on short-term price targets offered by six analysts, the Zacks average price target is $43.67 per share. The average suggests a potential 18.4% upside from the last closing price.
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RDN’s Encouraging Growth Projections
The Zacks Consensus Estimate for Radian Group’s 2026 earnings per share (EPS) indicates a year-over-year increase of 16.2%. The consensus estimate for revenues is pegged at $2.21 billion, implying a year-over-year improvement of 81%. The consensus estimate for 2027 EPS and revenues indicates an increase of 2.8% and 11.3%, respectively, from the corresponding 2026 estimates.
RDN’s Favorable Return on Invested Capital
Return on invested capital (ROIC) in the trailing 12 months was 7%, better than the industry average of 2.2%. This reflects RDN’s efficiency in utilizing funds to generate income. ROIC
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 trend in claim filings. We expect paid claims to decline further, thus strengthening the balance sheet and improving its financial profile.
Radian Group completed its strategic acquisition of Inigo in February 2026. The Inigo acquisition has transformed Radian into a more diversified insurer, reducing its reliance on the U.S. mortgage insurance market while expanding its presence in global specialty insurance and reinsurance. The deal is expected to create more resilient earnings through multiple revenue streams.
Higher investment income is another meaningful earnings tailwind. Net investment income has been improving, benefiting from higher invested assets and the addition of Inigo's investment portfolio. The higher interest-rate environment continues to support reinvestment yields, allowing Radian Group to generate stronger investment returns, an important contributor to overall insurer profitability.
Radian Group projects mid-teens percentage growth in EPS and approximately a 200-basis point increase in return on equity in the first full year after the transaction is closed in early 2026. RDN also expects the deal to double its total annual revenues, providing flexibility to deploy capital across multiple insurance lines through various business cycles.
Radian Group has also agreed to divest Mortgage Conduit, Title and Real Estate Services businesses. With this divestiture, the insurer intends to simplify its operations and focus on the new insurance venture, a global multi-line specialty insurance business.
Radian Group's strong capital position continues to support growth initiatives and shareholder returns. The company has strengthened its capital base through capital contributions, reinsurance transactions and a healthy cash position, providing ample financial flexibility. This has enabled RDN to consistently return capital through dividend increases and share repurchases. The quarterly dividend has more than doubled over the past five years, and marks the sixth consecutive year that RDN has raised its quarterly dividend. Its current dividend yield of 2.8% exceeds the industry average of 2.4%, making the stock attractive for income-focused investors. Management also believes the shares trade below intrinsic value, making share buybacks an efficient use of excess capital that enhances per-share earnings growth.
Conclusion
Improving mortgage insurance portfolio, declining claims, Inigo acquisition, rising investment income, a solid capital position and effective capital deployment should continue to favor mortgage insurers over the long term.
Its solid growth projections as well as attractive valuations are other positives. Coupled with impressive dividend history 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.
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Radian Group Inc. (RDN): Free Stock Analysis Report
MGIC Investment Corporation (MTG): Free Stock Analysis Report
Assurant, Inc. (AIZ): Free Stock Analysis Report
Old Republic International Corporation (ORI): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).