Why Radian (RDN) Is Up Today

NEW YORK (TheStreet) -- Radian (RDN) was gaining 6.7% to $15.14 Wednesday following its fourth quarter results that far surpassed analyst estimates for earnings and revenue.

The mortgage insurer posted earnings of 19 cents a share for the fourth quarter, while analysts surveyed by Thomson Reuters expected Radian to break even. In the year-ago quarter the company posted a loss of $1.34 a share. Revenue grew 20.2% to $271.6 million, compared to analyst estimates of $241.4 million.

The return to profitability and increased revenue was helped by a recovery in the U.S. housing market and fewer people defaulting on home loans.

In a statement CEO S.A. Ibrahim said "We expect that the size and credit quality of our MI (mortgage insurance) portfolio will fuel improved levels of operating profitability this year."

TheStreet Ratings team rates RADIAN GROUP INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate RADIAN GROUP INC (RDN) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its solid stock price performance. At the same time, however, we also find weaknesses including deteriorating net income, disappointing return on equity and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to its closing price of one year ago, RDN's share price has jumped by 132.43%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • The revenue fell significantly faster than the industry average of 102.3%. Since the same quarter one year prior, revenues slightly dropped by 6.2%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • RADIAN GROUP INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. The company has reported a trend of declining earnings per share over the past year. However, the consensus estimate suggests that this trend should reverse in the coming year. During the past fiscal year, RADIAN GROUP INC swung to a loss, reporting -$3.41 versus $2.25 in the prior year. This year, the market expects an improvement in earnings (-$1.60 versus -$3.41).
  • The gross profit margin for RADIAN GROUP INC is currently extremely low, coming in at 12.31%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -5.18% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$276.07 million or 245.65% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: RDN Ratings Report

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