Radian Group’s 52-Week High Driven by Improving Results

On Dec 4, private mortgage insurer Radian Group Inc. (RDN) touched a 52-week high of $17.38. The rise in the stock was propelled by strong third-quarter earnings which outpaced the Zacks Consensus Estimate by 125%. About 2.3 million shares exchanged hands in the last session.

Growth Drivers

Radian’s strong third-quarter financial performance reflected the gains it reaped from the improving housing market.

Investors are once again hopeful for the company, which suffered massive losses from the subprime mortgage crisis. This hope emanates from strong new business volume written by Radian in 2013, which helped the company end the year as the nation’s largest private mortgage insurance company with $161 billion of insurance in force, up 15% year over year.

Radian is also witnessing an improvement in the quality and size of mortgage insurance in force, which is expected to create a strong foundation for future earnings.

The company is also witnessing declining delinquency (delinquency triggers claims), led by the impact of an improving economy and the company’s continued focus on loss mitigation in its mortgage insurance portfolio.

Investors’ confidence in the stock also stems from the company’s strategy to diversify its business. This is reflected by the acquisition of Clayton Holdings in Jun 2014. Investors are sure that the buyout will generate a fee-based revenue for Radian and also broaden its participation in the residential mortgage market value chain, with services that complement its Mortgage Insurance business.

Estimate Revision Shows Strength

Driven by optimism surrounding the stock, over the last 60 days, the Zacks Consensus Estimate for 2014 earnings per share climbed 16.8% to $2.64. Estimates for 2015 moved up 2.6% to $1.57 over the same time frame.

Radian carries a Zacks Rank #2 (Buy).

Other Stocks to Consider

Other industry players worth considering include American International Group, Inc. (AIG), Assured Guaranty Ltd. (AGO) and Cigna Corp. (CI). All these stocks carry the same Zacks Rank as Radian.