Radian Group (RDN) recently reached a new 52 week high after a run of quarterly earnings that exceeded consensus estimates, attracting renewed attention from investors focused on the mortgage insurance specialist.

At the latest share price of $37.84, Radian Group’s recent 30 day share price return of 8.95% and 90 day return of 10.74% sit alongside a 1 year total shareholder return of 15.19% and 5 year total shareholder return of 102.51%. This points to momentum that has built over multiple years rather than just this recent 52 week high.

If Radian Group’s move to a fresh high has you thinking about what else is working in the market, it can be useful to compare it with other financials and 18 top founder-led companies

Radian Group now trades close to its 52 week high, but still sits below both analyst targets and some estimates of fair value. Is the market being sensibly cautious, or too slow to reprice the stock?

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

On a simple earnings yardstick, Radian Group looks inexpensive, with a P/E of 8.4x alongside earnings that are forecast to grow while trading well below some estimates of fair value.

The P/E ratio compares the current share price with earnings per share, so a lower multiple can suggest the market is placing a cautious value on each dollar of profit. For a mortgage insurance specialist like Radian Group, that can reflect how investors weigh current profitability against the characteristics of its funding structure and the cyclical nature of mortgage credit risk.

Here, Radian Group is flagged as trading at good value versus both peers and the broader US Diversified Financial industry on this 8.4x P/E measure, and it is also assessed as good value against an estimated fair P/E of 13x. That fair ratio level is materially higher than where the stock sits today, which points to room the market could move toward if sentiment and expectations on earnings were to align more closely with those fair value assumptions.

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

However, Radian Group’s mortgage insurance focus still leaves it exposed to swings in housing activity and potential shifts in credit quality across its insured portfolio.

Another View on Radian Group’s Value

While the 8.4x P/E suggests Radian Group looks inexpensive, the SWS DCF model paints an even stronger picture, with an estimated future cash flow value of $106.59 versus the recent $37.66 share price. That gap implies the market may be far more cautious than the cash flow assumptions. The key question is which signal you consider more reliable.

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 43 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

If this upbeat take on Radian Group has you interested, act while the details are fresh and test the optimism against your own view by reviewing the 4 key rewards

Looking for more investment ideas beyond Radian Group?

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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.