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GuruFocus has detected 4 Warning Signs with Radian Group Inc $RDN.
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Radian Group Inc (NYSE:RDN)
Piotroski F-Score
7 (As of Today)

Good Sign:

Piotroski F-Score of 7 is 7, indicating very healthy situation.

The zones of discrimination were as such:

Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3

Radian Group Inc has an F-score of 7. It is a good or high score, which usually indicates a very healthy situation.

RDN' s Piotroski F-Score Range Over the Past 10 Years
Min: 1   Max: 7
Current: 7

1
7

During the past 13 years, the highest Piotroski F-Score of Radian Group Inc was 7. The lowest was 1. And the median was 4.


Definition

How is the Piotroski F-Score calculated?

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Net Income was 66.249 + 98.112 + 82.803 + 61.089 = $308 Mil.
Cash Flow from Operations was 41.869 + 112.629 + 135.639 + 91.587 = $382 Mil.
Revenue was 312.952 + 330.168 + 320.883 + 274.449 = $1,238 Mil.
Gross Profit was 312.952 + 330.168 + 320.883 + 274.449 = $1,238 Mil.
Average Total Assets from the begining of this year (Dec15)
to the end of this year (Dec16) was
(5642.1 + 5969.391 + 6067.263 + 6049.827 + 5863.174) / 5 = $5918.351 Mil.
Total Assets at the begining of this year (Dec15) was $5,642 Mil.
Long-Term Debt was $1,070 Mil.
Total Current Assets was $0 Mil.
Total Current Liabilities was $0 Mil.
Net Income was 92.257 + 50.048 + 70.091 + 74.528 = $287 Mil.

Revenue was 290.663 + 330.416 + 297.292 + 274.882 = $1,193 Mil.
Gross Profit was 290.663 + 330.416 + 297.292 + 274.882 = $1,193 Mil.
Average Total Assets from the begining of last year (Dec14)
to the end of last year (Dec15) was
(6842.336 + 6813.855 + 5736.504 + 5760.916 + 5642.1) / 5 = $6159.1422 Mil.
Total Assets at the begining of last year (Dec14) was $6,842 Mil.
Long-Term Debt was $1,219 Mil.
Total Current Assets was $0 Mil.
Total Current Liabilities was $0 Mil.

Profitability

Question 1. Return on Assets (ROA)

Net income before extraordinary items for the year divided by total assets at the beginning of the year.

Score 1 if positive, 0 if negative.

Radian Group Inc's current net income (TTM) was 308. ==> Positive ==> Score 1.

Question 2. Cash Flow Return on Assets (CFROA)

Net cash flow from operating activities (operating cash flow) divided by total assets at the beginning of the year.

Score 1 if positive, 0 if negative.

Radian Group Inc's current cash flow from operations (TTM) was 382. ==> Positive ==> Score 1.

Question 3. Change in Return on Assets

Compare this year’s return on assets (1) to last year’s return on assets.

Score 1 if it’s higher, 0 if it’s lower.

ROA (This Year)=Net Income (TTM)/Total Assets at the Beginning of This Year (Dec15)
=308.253/5642.1
=0.05463444

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Dec14)
=286.924/6842.336
=0.04193363

Radian Group Inc's return on assets of this year was 0.05463444. Radian Group Inc's return on assets of last year was 0.04193363. ==> This year is higher. ==> Score 1.

Question 4. Quality of Earnings (Accrual)

Compare Cash flow return on assets (2) to return on assets (1)

Score 1 if CFROA > ROA, 0 if CFROA <= ROA.

Radian Group Inc's current net income (TTM) was 308. Radian Group Inc's current cash flow from operations (TTM) was 382. ==> 382 > 308 ==> CFROA > ROA ==> Score 1.

Funding

Question 5. Change in Gearing or Leverage

Compare this year’s gearing (long-term debt divided by average total assets) to last year’s gearing.

Score 0 if this year's gearing is higher, 1 otherwise.

Gearing (This Year: Dec16)=Long-Term Debt/Average Total Assets from Dec15 to Dec16
=1069.537/5918.351
=0.18071537

Gearing (Last Year: Dec15)=Long-Term Debt/Average Total Assets from Dec14 to Dec15
=1219.454/6159.1422
=0.19799088

Radian Group Inc's gearing of this year was 0.18071537. Radian Group Inc's gearing of last year was 0.19799088. ==> This year is lower or equal to last year. ==> Score 1.

Question 6. Change in Working Capital (Liquidity)

Compare this year’s current ratio (current assets divided by current liabilities) to last year’s current ratio.

Score 1 if this year'’s current ratio is higher, 0 if it’s lower

Current Ratio (This Year: Dec16)=Total Current Assets/Total Current Liabilities
=0/0
=

Current Ratio (Last Year: Dec15)=Total Current Assets/Total Current Liabilities
=0/0
=

Radian Group Inc's current ratio of this year was . Radian Group Inc's current ratio of last year was . ==> Last year's current ratio is higher ==> Score 0.

Question 7. Change in Shares in Issue

Compare the number of shares in issue this year, to the number in issue last year.

Score 0 if there is larger number of shares in issue this year, 1 otherwise.

Radian Group Inc's number of shares in issue this year was 229.3. Radian Group Inc's number of shares in issue last year was 246.3. ==> There is smaller number of shares in issue this year, or the same. ==> Score 1.

Efficiency

Question 8. Change in Gross Margin

Compare this year’s gross margin (gross profit divided by sales) to last year’s.

Score 1 if this year’s gross margin is higher, 0 if it’s lower.

Gross Margin (This Year: TTM)=Gross Profit/Revenue
=1238.452/1238.452
=1

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=1193.253/1193.253
=1

Radian Group Inc's gross margin of this year was 1. Radian Group Inc's gross margin of last year was 1. ==> Last year's gross margin is higher ==> Score 0.

Question 9. Change in asset turnover

Compare this year’s asset turnover (total sales for the year divided by total assets at the beginning of the year) to last year’s asset turnover ratio.

Score 1 if this year’s asset turnover ratio is higher, 0 if it’s lower

Asset Turnover (This Year)=Revenue (TTM)/Total Assets at the Beginning of This Year (Dec15)
=1238.452/5642.1
=0.21950196

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Dec14)
=1193.253/6842.336
=0.17439263

Radian Group Inc's asset turnover of this year was 0.21950196. Radian Group Inc's asset turnover of last year was 0.17439263. ==> This year's asset turnover is higher. ==> Score 1.

Evaluation

Piotroski F-Score= Que. 1+ Que. 2+ Que. 3+Que. 4+Que. 5+Que. 6+Que. 7+Que. 8+Que. 9
=1+1+1+1+1+0+1+0+1
=7

Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3

Radian Group Inc has an F-score of 7. It is a good or high score, which usually indicates a very healthy situation.


Explanation

The developer of the system is Joseph D. Piotroski is relatively unknown accounting professor who shuns publicity and rarely gives interviews.

He graduated from the University of Illinois with a B.S. in accounting in 1989, received an M.B.A. from Indiana University in 1994. Five years later, in 1999, after earning a Ph.D. in accounting from the University of Michigan, he became an associate professor of accounting at the University of Chicago.

In 2000, he wrote a research paper called "Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers" (pdf).

He wanted to see if he can develop a system (using a simple nine-point scoring system) that can increase the returns of a strategy of investing in low price to book (referred to in the paper as high book to market) value companies.

What he found was something that exceeded his most optimistic expectations.

Buying only those companies that scored highest (8 or 9) on his nine-point scale, or F-Score as he called it, over the 20 year period from 1976 to 1996 led to an average out-performance over the market of 13.4%.

Even more impressive were the results of a strategy of investing in the highest F-Score companies (8 or 9) and shorting companies with the lowest F-Score (0 or 1).

Over the same period from 1976 to 1996 (20 years) this strategy led to an average yearly return of 23%, substantially outperforming the average S&P 500 index return of 15.83% over the same period.


Related Terms

Net Income, Cash Flow from Operations, Revenue, Gross Profit, Total Assets, Long-Term Debt, Total Current Assets, Total Current Liabilities


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Radian Group Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Question 1 0000100111
Question 2 1010000011
Question 3 0110101101
Question 4 1111000001
Question 5 0110110011
Question 6 0000000000
Question 7 1000010001
Question 8 0000000000
Question 9 0100100101
F-score 3441421337

Radian Group Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Question 1 1111111111
Question 2 0001111111
Question 3 1111100001
Question 4 0000000001
Question 5 0001110011
Question 6 0000000000
Question 7 0000001111
Question 8 0000000000
Question 9 1111100111
F-score 3335533457
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