Radian Group (RDN) recently drew investor attention after its latest share price move, with the stock closing at US$38.99. The company’s mortgage insurance focused business and recent returns are now in sharper focus for portfolio reviews.

Looking beyond the latest move to US$38.99, Radian Group’s recent 30 day share price return of 3.37% and 90 day share price return of 10.05% sit alongside a 1 year total shareholder return of 22.01%. This points to momentum that has been building rather than fading.

If this kind of steady progress has you reviewing your watchlist, it can be useful to see what else is working in the market by checking out 18 top founder-led companies

For Radian Group, that steady climb to US$38.99 can reflect either confidence in its mortgage insurance business or a swing in sentiment around the stock. Which of those dominates is where the valuation work starts.

Price to earnings of 8.7x for Radian Group: Is it justified?

Radian Group screens as good value on its preferred metric, with a P/E of 8.7x at a last close of $38.99 compared to both peers and the wider US Diversified Financial industry.

The P/E ratio compares the company’s share price to its earnings per share. For a mortgage insurance focused business like Radian Group, this gives a quick read on how the market is valuing its current profitability and expected profit trends.

On the numbers provided, Radian Group trades at a P/E of 8.7x, which the analysis flags as good value relative to the US Diversified Financial industry average of 15.3x and a peer average of 8.9x. It is also below an estimated fair P/E of 13x, a level the market could move toward if sentiment and expectations align with those fair value assumptions.

Taken together, these comparisons point to a stock that is priced more conservatively than both its industry and its own fair ratio benchmark, despite forecasts that earnings are expected to grow and revenue is forecast to grow faster than both the US market and the 20% threshold used in the analysis. Result: Price-to-earnings of 8.7x (UNDERVALUED)

However, Radian Group’s mortgage insurance focus still ties the story closely to housing and credit conditions, and any shift in underwriting results could quickly challenge the current valuation narrative.

Another view on Radian Group using the SWS DCF model

The earlier P/E discussion presents Radian Group as attractively priced. The SWS DCF model provides an additional perspective and indicates a fair value of $107.02 per share compared with the current $38.99. That gap points to a notably different picture of potential undervaluation. Which signal do you place more weight on?

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 55 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

Given the mixed signals around Radian Group so far, it makes sense to move quickly and review the underlying data for yourself. To see what investors are currently optimistic about, take a closer look at the 4 key rewards

Looking for more investment ideas beyond Radian Group?

If Radian Group has you thinking harder about valuation and risk, do not stop here. Broaden your watchlist now so you are not reacting after prices move.

• Target potential mispricing by scanning for companies that combine strong fundamentals with appealing valuations through the 55 high quality undervalued stocks
• Strengthen the income side of your portfolio by reviewing companies in the 9 dividend fortresses
• Reduce portfolio stress by focusing on companies screened for resilience using the 81 resilient stocks with low risk scores

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.