Will Radian Group Keep Soaring Throughout 2012?
With half of 2012 in the record books, it's important to take a look at whether the stocks that interest you can live up to their full potential. By making sure you know about a company's future plans and possible challenges, you can make a better decision about whether it's a smart investment for your portfolio.
Today, let's take a look at Radian Group (NYS: RDN) . As we saw in our look at Radian last month, the mortgage-insurance provider took a big hit when the housing market collapsed, but since the worst of the financial crisis ended, Radian has managed to survive despite continuing challenges. It got crushed during the housing bust, and since then, it has struggled to hold its own in a continually tough economic environment. Let's take a quick look at Radian's prospects for the rest of the year and beyond.
Stats on Radian Group
|Median Target Stock Price||$4.79|
|2012 EPS Estimate||($2.62)|
|2013 EPS Estimate||($0.28)|
|2012 Sales Growth Estimate||(6.2%)|
|2013 Sales Growth Estimate||8.9%|
|Expected Annual Growth, Next 5 Years||12.0%|
Source: Yahoo Finance.
What will the rest of 2012 bring for Radian?
Over the past several years, Radian and its peers in the financial insurance industry have faced threats that jeopardized their viability as businesses. Although conditions have improved somewhat, the industry has a long way to go before it recovers fully.
On one hand, mortgage market quality has arguably improved as lenders tighten standards for approving mortgages. With Radian, MGIC Investment (NYS: MTG) , and Genworth Financial (NYS: GNW) having seen rising volume in insurance policies they've written, slow but steady improvement in the housing market will only be a positive for that side of the business.
On the other hand, though, the municipal side of the financial insurance business looks poised for another leg down. Municipal bankruptcies in California, including the big filing by Stockton, signal weakness that could hurt MBIA (NYS: MBI) and Assured Guaranty (NYS: AGO) going forward. Yet insurers have actually moved significantly higher since the bankruptcy filing. Moreover, Radian's sale of its municipal bond insurance unit to Assured Guaranty should minimize Radian's exposure to any future muni crisis.
Meanwhile, much depends on how major investor Clinton Group goes forward with its activist activities. If shares rise on their own, though, any move it or others might make would be moot.
All in all, Radian Group has a strong chance of seeing continuing gains for the rest of the year. But it's not the only promising stock out there. Let me invite you to learn about three smart long-term stock plays in the Fool's latest special report. It's yours for the taking and is absolutely free, but don't miss out -- click here and read it today.
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At the time this article was published Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.