Comparing Radian Group (RDN) and Assured Guaranty (AGO)

Radian Group (NYSE: RDN) and Assured Guaranty (NYSE:AGO) are both mid-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their valuation, earnings, profitability, analyst recommendations, risk, institutional ownership and dividends.

Valuation and Earnings

This table compares Radian Group and Assured Guaranty’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Radian Group $1.24 billion 3.87 $308.25 million $0.78 28.54
Assured Guaranty $1.68 billion 2.36 $881.00 million $6.94 4.86

Assured Guaranty has higher revenue and earnings than Radian Group. Assured Guaranty is trading at a lower price-to-earnings ratio than Radian Group, indicating that it is currently the more affordable of the two stocks.

Dividends

Radian Group pays an annual dividend of $0.01 per share and has a dividend yield of 0.0%. Assured Guaranty pays an annual dividend of $0.57 per share and has a dividend yield of 1.7%. Radian Group pays out 1.3% of its earnings in the form of a dividend. Assured Guaranty pays out 8.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Radian Group has raised its dividend for 6 consecutive years.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Radian Group and Assured Guaranty, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Radian Group 0 2 8 0 2.80
Assured Guaranty 0 0 3 0 3.00

Radian Group currently has a consensus price target of $23.88, suggesting a potential upside of 7.26%. Assured Guaranty has a consensus price target of $48.00, suggesting a potential upside of 42.22%. Given Assured Guaranty’s stronger consensus rating and higher probable upside, analysts plainly believe Assured Guaranty is more favorable than Radian Group.

Volatility and Risk

Radian Group has a beta of 1.57, meaning that its share price is 57% more volatile than the S&P 500. Comparatively, Assured Guaranty has a beta of 1.64, meaning that its share price is 64% more volatile than the S&P 500.

Institutional and Insider Ownership

91.5% of Radian Group shares are held by institutional investors. Comparatively, 95.8% of Assured Guaranty shares are held by institutional investors. 1.1% of Radian Group shares are held by insiders. Comparatively, 2.6% of Assured Guaranty shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares Radian Group and Assured Guaranty’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Radian Group 14.88% 12.99% 6.51%
Assured Guaranty 45.38% 10.59% 4.88%

Summary

Assured Guaranty beats Radian Group on 10 of the 17 factors compared between the two stocks.

Radian Group Company Profile

Radian Group Inc. is an insurance holding company that provides mortgage insurance, and products and services to the real estate and mortgage finance industries. The Company operates in two segments: Mortgage Insurance and Services. The Mortgage Insurance segment provides credit-related insurance coverage, principally through private mortgage insurance to mortgage lending institutions. The Services segment provides outsourced services, information-based analytics valuations and specialty consulting and surveillance services for buyers and sellers of, and investors in, mortgage- and real estate-related loans and securities, as well as other asset-backed securities (ABS). It also offers mortgage insurance products, such as primary mortgage insurance and pool insurance. Its Services segment is engaged in offering businesses, such as loan review and due diligence, and surveillance, including residential mortgage-backed securities (RMBS) surveillance and loan servicer oversight.

Assured Guaranty Company Profile

Assured Guaranty Ltd. is a holding company. The Company, through its subsidiaries, provides credit protection products to the United States and international public finance, including infrastructure, and structured finance markets. It applies its credit underwriting judgment, risk management skills and capital markets experience primarily to offer financial guaranty insurance that protects holders of debt instruments and other monetary obligations from defaults in scheduled payments. It markets its financial guaranty insurance directly to issuers and underwriters of public finance and structured finance securities, as well as to investors in such obligations. It guarantees obligations issued principally in the United States and the United Kingdom and also guarantees obligations issued in other countries and regions, including Australia and Western Europe. It also provides other forms of insurance that are in line with its risk profile and benefit from its underwriting experience.

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