BTIG keeps Neutral on Radian Group, says returns can still be in mid-teens

BTIG notes that Radian Group’s (RDN) stock is off 5% intraday despite a relatively good/in-line earnings report, with similar sensitivity appearing in other MIs, including those which have historically attracted the strongest valuation premiums like Essent (ESNT) and NMI (NMIH). BTIG thinks investors are reading into potentially more limited earnings growth available for MIs, partly driven by some normalization of loss rates, and fewer catalysts to support first-time buyers aside from improved affordability and more housing supply. At even slightly higher loss rates, the firm believes returns can still be in the mid-teens, but there’s less leeway to miss going forward with stocks having used up the benefit over the last two years from the reversal of loss reserves mostly associated with borrowers receiving forbearances at the onset of the pandemic. BTIG has a Neutral rating on Radian’s shares.