Radian Group: Strategic Share Repurchases and Strong Fundamentals Justify an Aggressive Buy Case

In the annals of value investing, few principles are as enduring as the disciplined allocation of capital. The essence of this philosophy lies not merely in identifying companies with robust earnings, but in recognizing those that deploy their resources—both financial and operational—to generate compounding value for shareholders. Radian Group (NYSE: RDN) emerges in Q2 2025 as a textbook example of such an enterprise, with a combination of strategic share repurchases, a fortress-like balance sheet, and a compelling earnings trajectory that together present a compelling case for aggressive investment.

A Foundation of Fundamentals

Radian's Q2 results are a testament to its operational discipline. A return on equity (ROE) of 12.5% underscores its ability to generate returns that comfortably exceed the cost of capital—a critical metric for value investors. With net income of $142 million and earnings per share (EPS) of $1.02, the company not only exceeded analyst expectations but also demonstrated resilience in a sector often buffeted by macroeconomic volatility. These figures are not isolated wins but part of a broader trend: Radian's book value per share has grown by 12% year-over-year, reaching $33.18, while its gross profit margin of 93.5% reflects a business model that prioritizes margin preservation.

The company's liquidity position further reinforces its credibility. Holding company liquidity of $784 million, coupled with an undrawn credit facility of $275 million, provides a buffer against cyclical downturns and enables Radian to pursue opportunities without overleveraging. This financial flexibility is rare in today's market, where many firms are constrained by deleveraging mandates or speculative debt.

Historical data from 2022 to the present reveals that Radian's pattern of outperforming earnings expectations has historically translated into positive stock performance. When the company beats expectations, the stock has delivered a 50% win rate over 3 and 10 days, and a 33.33% win rate over 30 days. Notably, the maximum return of 4.30% was observed on day 58, suggesting that the market often recognizes the intrinsic value of Radian's earnings momentum over time. This trend aligns with the company's Q2 2025 results, where the EPS beat of $1.02 indicates a potential catalyst for similar post-earnings outperformance.

The logic is simple but powerful: every dollar spent on buybacks at a price below intrinsic value directly boosts earnings per share and equity value. With Radian's P/E ratio trading at 8.2x—a significant discount to historical averages and industry peers—the company is effectively compounding returns for shareholders at a time when the market appears to be underappreciating its long-term potential.

Capital Allocation as a Competitive Advantage

The most striking aspect of Radian's Q2 performance, however, is its aggressive share repurchase program. The company repurchased 13.5 million shares, a figure that eclipses the combined total of 2023 and 2024. This is not mere financial theater—it is a calculated move to enhance shareholder value by retiring equity at a price that is undervalued relative to intrinsic worth. At a current stock price of $33.51, Radian's share buybacks are effectively funded at a discount to book value (which stands at $33.18), creating a margin of safety that is the bedrock of value investing.

The data from 2022 to the present further underscores the efficacy of this strategy. When Radian beats earnings expectations, the stock has historically trended upward, with a 4.30% maximum return observed within 58 days. This suggests that the market's delayed recognition of the company's operational strengths often leads to a re-rating of the stock over time.

A Discounted Opportunity in a Stabilizing Sector

Radian's mortgage insurance business, the core of its operations, is also showing signs of stabilization and growth. The company's insurance in force has reached an all-time high of $27.7 billion, with a persistency rate of 84% and a default rate of 2.27%—both indicators of a well-managed portfolio. The reduction in defaults and the strong cure rates suggest that Radian's risk-based pricing models, such as Radar Rates, are functioning as intended, further insulating the company from credit losses.

Despite these positives, the stock has fallen 2.57% in the quarter, closing at $33.51. This decline appears to be a function of broader market sentiment rather than company-specific risks. Radian's beta of 0.71—a measure of volatility relative to the S&P 500—confirms its defensive characteristics, making it an attractive counterbalance to more cyclical sectors.

The Case for Immediate Action

For value investors, the calculus is clear: Radian offers a rare combination of a low valuation multiple, a strong return on capital, and a management team that is actively deploying cash to benefit shareholders. The 3.04% dividend yield—a feature of Radian's 33-year unbroken dividend history—adds another layer of appeal, particularly in a rising interest rate environment where income-focused investors are increasingly selective.

The stock's current price of $33.51 trades at a 13% discount to its 52-week high of $37.86, yet the company's fundamentals suggest that this gap is unwarranted. With forward EPS estimates of $1.02 for Q3 and $1.04 for Q4, the earnings trajectory is upward, and the share repurchase program is accelerating. At this juncture, the market appears to be underestimating Radian's ability to navigate macroeconomic headwinds while maintaining its capital allocation discipline.

Historical performance also supports the case for patience. When Radian has beaten earnings expectations, the stock has demonstrated a tendency to outperform over 58 days, with a maximum return of 4.30%. This pattern suggests that the current valuation may represent a mispricing that could be corrected as the market digests the company's operational resilience and capital-efficient strategy.

Conclusion

In the words of Benjamin Graham, the father of value investing, “Price is what you pay; value is what you get.” Radian Group's Q2 performance exemplifies this principle. The company's 12.5% ROE, $142 million net income, and $1.02 EPS are not just numbers—they are signals of a business that is generating value efficiently and distributing it to shareholders with precision. The aggressive share repurchases, supported by $784 million in liquidity, further underscore a management team that is aligned with long-term investor interests.

For those who recognize the art of capital allocation and the discipline of value investing, Radian Group is not merely a buy—it is an opportunity to acquire a well-run, undervalued business at a price that history suggests is unlikely to persist. The optimal time to act is now.