Radian may be undervalued with poor growth indicators, but the 7 analysts following the company give it an rating of hold. Their target prices range from $21.0 to $30.0 per share, for an average of $25.79. At today's price of $25.52, Radian is trading -1.03% away from its average target price, suggesting there is an analyst consensus of some upside potential for the stock.
Radian Group Inc., together with its subsidiaries, engages in the mortgage and real estate services business in the United States. Based in Wayne, PA, the mid-cap Finance company has 1,400 full time employees. Radian has provided a 3.2% dividend yield over the last 12 months.
Radian has a trailing twelve month P/E ratio of 5.9, compared to an average of 14.34 for the Finance sector. Based on its EPS guidance of 3.15, the company has a forward P/E ratio of 8.1.
The average compound growth rate of the company's historical and projected earnings per share is -0.3%. On this basis, the company's PEG ratio is -16.91. However, this growth rate is probably not sustainable. In its place we will use the broader market's estimated 5-year EPS growth rate of 6.0%, which gives us a PEG ratio of 0.89. Even with this more conservative assumption on EPS growth, the PEG ratio suggests that Radian shares are underpriced.
On the other hand, the market is potentially undervaluing Radian in terms of its book value because its P/B ratio is 0.97. In comparison, the sector average P/B ratio is 1.57. The company's shares are currently -41.0% below their Graham number, indicating that its shares have a margin of safety.
If analysts are giving the the company a mediocre rating despite its low valuation point, it could be related to the company's disappointing cash flows. Radian's dissapointing EPS growth rate of 7.8% is another negative point.
| 2019-12-31 | 2020-12-31 | 2021-12-31 | 2022-12-31 | |
|---|---|---|---|---|
| Revenue (MM) | $1,527 | $1,439 | $1,330 | $1,191 |
| Interest Income | -$56,310 | -$71,150 | -$84,344 | -$84,454 |
| Net Margins | 44.03% | 27.36% | 45.17% | 62.39% |
| Net Income (MM) | $672 | $394 | $601 | $743 |
| Depreciation & Amort. | -$22,288 | -$5,144 | -$3,450 | -$4,308 |
| Earnings Per Share | $3.2 | $2.0 | $3.16 | $4.32 |
| EPS Growth | n/a | -37.5% | 58.0% | 36.71% |
| Diluted Shares (MM) | 210 | 197 | 190 | 156 |
| Free Cash Flow (MM) | $667 | $641 | $545 | $371 |
| Capital Expenditures (MM) | -$28 | -$17 | -$13 | -$18 |
| Long Term Debt (MM) | $1,022 | $1,582 | $1,560 | $1,569 |
| Net Debt / EBITDA | 1.61 | 2.69 | 1.65 | 1.45 |
