Radian Group (RDN) Could Be 25% Undervalued Following Strong Third Quarter Earnings

Radian Group (RDN) just reported third quarter revenue of US$624.11 million and net income of US$163.66 million, giving investors new data to reassess the stock.

Recent price action has been positive, with a 1-day share price return of 1.94%, a 7-day gain of 4.46% and a 1-month move of 9.26% taking Radian Group to US$37.27. A 1-year total shareholder return of 13.23% and a 5-year total shareholder return of 95.38% point to momentum that has built over time rather than faded.

Compare Radian Group’s latest move with other financials that show persistent price and earnings momentum by reviewing the hand-picked 42 high quality undervalued stocks.

Radian Group has already rewarded patient holders, yet the latest earnings jump and recent price move still leave a bigger question on the table: Is most of the upside already captured, or does valuation point to more room ahead?

Price-to-Earnings of 8.4x: Is it justified?

On simple valuation optics, Radian Group looks cheap. The stock closed at $37.27 while trading on a P/E of 8.4x that screens as good value against both peers and the wider US Diversified Financial industry.

The P/E ratio compares what investors pay for each dollar of current earnings. For a mortgage insurer like Radian Group, it gives a quick read on how the market prices the business relative to its profit base, which can be influenced by the credit cycle, housing trends and claim experience.

Radian Group is flagged as good value on several fronts. Its P/E of 8.4x is assessed as attractive versus an estimated fair P/E of 11.2x, a peer average of 8.9x and a broader industry average of 14.7x. That combination points to a market that is assigning a lower earnings multiple than the levels some models suggest it could trade at, even though the firm has high quality earnings and is viewed as trading at good value compared to peers and the industry overall.

This fair P/E of 11.2x is the level that valuation work indicates the market could reasonably move toward if sentiment and fundamentals align.

Explore the SWS fair ratio for Radian Group.

Result: Price-to-Earnings of 8.4x (UNDERVALUED)

Still, the story can change quickly if mortgage credit losses rise, or if housing activity slows and weighs on Radian Group’s future policy volumes.

Find out about the key risks to this Radian Group narrative.

Another View: What The DCF Model Says About Radian Group

That low P/E paints Radian Group as inexpensive, but the SWS DCF model goes even further. Through this cash flow lens, the shares at $37.27 are compared against an estimated future cash flow value of $111.16, which flags the stock as deeply undervalued on that framework.

If the market ever drifts closer to that DCF outcome, the gap between price and modeled value would narrow significantly. The key question for you is simple: which yardstick feels more convincing when you weigh mortgage risk, earnings quality and your own risk tolerance?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Radian Group for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 42 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

Sentiment on Radian Group is mixed, with solid reported figures on one side and clear risk flags on the other, so it pays to check the detail for yourself before leaning too hard in either direction. To weigh those cross currents quickly and form your own view on the balance of upside and downside, review the 3 key rewards and 1 important warning sign

Looking for more ideas beyond Radian Group?

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