Why Radian Group (RDN) Stock Is Falling This Morning

NEW YORK (TheStreet) -- Shares of Radian Group Inc. (RDN) are down by -4.60 % to $13.88 on heavy volume in mid-morning trading on Friday as the property and casual insurance company reacts negatively to the Federal Housing Finance Agency's newly proposed standards.

The FHFA is planning Private Mortgage Insurer Eligibility Requirements (PMIERS) which would require higher capital standards on the mortgage insurers Fannie Mae (FNMA) and Freddie Mac (FMCC) work with, Market News reports.

Companies have until September 8 to comment on the new PMIERS. Radian called the FHFA's regulations "more onerous than the company's historical default experience suggests would be needed to withstand a severe stress event," Market Watch added.

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Shares of mortgage insurer MGIC Investment Corp. (MTG) also tanked -12.12% to $2.12 on heavy volume following the FHFA's new standards.

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

"We rate RADIAN GROUP INC (RDN) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, expanding profit margins, good cash flow from operations and solid stock price performance. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook."

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

  • RDN's very impressive revenue growth greatly exceeded the industry average of 0.0%. Since the same quarter one year prior, revenues leaped by 717.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Thrifts & Mortgage Finance industry and the overall market, RADIAN GROUP INC's return on equity exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for RADIAN GROUP INC is rather high; currently it is at 68.71%. It has increased significantly from the same period last year. Along with this, the net profit margin of 58.55% significantly outperformed against the industry average.
  • Net operating cash flow has increased to -$137.01 million or 17.44% when compared to the same quarter last year. In addition, RADIAN GROUP INC has also vastly surpassed the industry average cash flow growth rate of -38.64%.
  • Powered by its strong earnings growth of 172.30% and other important driving factors, this stock has surged by 27.94% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, RDN should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • You can view the full analysis from the report here: RDN Ratings Report
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