As you might know, Radian Group Inc. (NYSE:RDN) recently reported its first-quarter numbers. It looks like a credible result overall - although revenues of US$319m were in line with what the analysts predicted, Radian Group surprised by delivering a statutory profit of US$0.98 per share, a notable 16% above expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.
Following last week's earnings report, Radian Group's four analysts are forecasting 2024 revenues to be US$1.26b, approximately in line with the last 12 months. Statutory earnings per share are forecast to fall 15% to US$3.36 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$1.27b and earnings per share (EPS) of US$3.31 in 2024. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.
It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$32.00. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Radian Group, with the most bullish analyst valuing it at US$35.00 and the most bearish at US$28.00 per share. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.
Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. From these estimates it looks as though the analysts expect the years of declining revenue to come to an end, given the flat forecast out to 2024. That would be a definite improvement, given that the past five years have seen revenue shrink 4.5% annually. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to see their revenue grow 3.7% per year. Although Radian Group's revenues are expected to improve, it seems that it is still expected to grow slower than the wider industry.
The Bottom Line
The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Radian Group analysts - going out to 2026, and you can see them free on our platform here.
That said, it's still necessary to consider the ever-present spectre of investment risk. We've identified 1 warning sign with Radian Group , and understanding it should be part of your investment process.
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