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PennyMac Financial (PFSI)
NYSE:PFSI
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PennyMac Financial
(NYSE:PFSI)
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Rating:69Neutral
Price Target:
$175.00
▲(9.75% Upside)
PennyMac Financial's overall stock score reflects strong earnings performance and strategic positioning in the mortgage market. The company's profitability and market leadership are significant strengths, but high leverage and negative cash flows pose risks. Technical indicators support a positive trend, while valuation metrics suggest the stock is fairly priced. The earnings call provided a positive outlook, though some challenges remain.
Positive Factors
Strong Return on Equity
A high return on equity indicates efficient use of shareholder funds and strong profitability, supporting long-term financial health.
Strategic MSR Sale
The strategic sale of MSRs frees up capital for higher return opportunities, enhancing the company's capital efficiency and growth potential.
Market Leadership in Correspondent Lending
Maintaining a leading market position in correspondent lending strengthens competitive advantage and supports sustained revenue streams.
Negative Factors
High Leverage
High leverage can limit financial flexibility and increase risk, potentially affecting the company's ability to invest in growth opportunities.
Negative Cash Flows
Negative cash flows can strain liquidity and hinder the company's ability to fund operations and investments, impacting long-term stability.
Increased Corporate Expenses
Rising expenses can pressure margins and reduce profitability, potentially affecting the company's ability to sustain earnings growth.
PennyMac Financial (PFSI) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$8.29B
Dividend Yield0.9%
Average Volume (3M)394.03K
Price to Earnings (P/E)17.2
Beta (1Y)0.52
Revenue Growth25.42%
EPS Growth190.85%
CountryUS
Employees4,457
SectorFinancial
Sector Strength70
IndustryFinancial - Mortgages
Share Statistics
EPS (TTM)3.37
Shares Outstanding51,965,473
10 Day Avg. Volume379,080
30 Day Avg. Volume394,031
Financial Highlights & Ratios
PEG Ratio0.15
Price to Book (P/B)1.36
Price to Sales (P/S)3.27
P/FCF Ratio-1.14
Enterprise Value/Market Cap1.44
Enterprise Value/Revenue3.85
Enterprise Value/Gross Profit5.30
Enterprise Value/Ebitda14.02
Forecast
1Y Price Target
$153.43Price Target Upside-3.78% Downside
Rating ConsensusModerate Buy
Number of Analyst Covering7
EPS Forecast (FY)N/A
Revenue Forecast (FY)N/A
PennyMac Financial Business Overview & Revenue Model
Company DescriptionPennyMac Financial Services, Inc., through its subsidiaries, engages in the mortgage banking and investment management activities in the United States. It operates through three segments: Production, Servicing, and Investment Management. The Production segment is involved in the origination, acquisition, and sale of loans. It sources first-lien residential conventional and government-insured or guaranteed mortgage loans. The Servicing segment engages in the servicing of newly originated loans, and execution and management of early buyout transactions and servicing of loans. It performs loan administration, collection, and default management activities, including the collection and remittance of loan payments, response to customer inquiries, accounting for principal and interest, holding custodial funds for the payment of property taxes and insurance premiums, counseling delinquent borrowers, and supervising foreclosures and property dispositions, as well as administers loss mitigation activities, such as modification and forbearance programs. The Investment Management segment is involved in sourcing, performing diligence, bidding, and closing investment asset acquisitions; managing correspondent production activities for PennyMac Mortgage Investment Trust; and managing acquired assets. PennyMac Financial Services, Inc. was founded in 2008 and is headquartered in Westlake Village, California.
How the Company Makes MoneyPennyMac Financial generates revenue through several key streams. The primary revenue source comes from mortgage origination fees, which are charged when new loans are processed and funded. Additionally, the company earns revenue from mortgage servicing rights, where it collects monthly servicing fees for managing mortgage loans on behalf of investors. PennyMac also generates income from the sale of loans in the secondary market and through the management of mortgage-backed securities. The company benefits from strategic partnerships with various financial institutions and investors, which enhance its capacity to originate and service loans efficiently. Furthermore, the company's focus on operational efficiencies and technology-driven solutions helps optimize its cost structure, contributing positively to its overall profitability.
PennyMac Financial Earnings Call Summary
Earnings Call Date:Oct 21, 2025
(Q3-2025)
| % Change Since: |
Next Earnings Date:Jan 29, 2026
Earnings Call Sentiment Positive
The earnings call highlighted strong financial performance and strategic achievements, including a high return on equity, successful MSR sale, and market leadership in lending channels. However, there were challenges such as a decline in correspondent volume, seasonal impacts, and increased expenses.Q3-2025 Updates
Positive Updates
Strong Return on Equity
Achieved an 18% return on equity on both a GAAP and operating basis, demonstrating the earnings power of PennyMac's business model.
Strategic MSR Sale
Completed the sale of MSRs with an unpaid principal balance of $12 billion to Annaly Capital Management, freeing up capital for higher return opportunities.
Market Leadership in Correspondent Lending
Generated over $100 billion in UPB of correspondent production in the last 12 months, achieving an estimated market share of approximately 20% in 2025.
Growth in Broker Direct Channel
Broker direct market share expanded to just under 6%, with a goal to reach more than 10% by the end of 2026.
Increase in Consumer Direct Origination Volumes
Consumer direct origination volumes up 12% and lock volumes up 57% from the prior quarter, driven by refinance activities.
Significant Servicing Portfolio Growth
Servicing portfolio grew to $717 billion in unpaid principal balance, contributing significantly to pre-tax income.
Successful Hedging Strategy
Hedge results offset the vast majority of MSR fair value declines, demonstrating robust financial stability and risk management.
Negative Updates
Decline in Correspondent Volume
Total correspondent acquisitions were $28 billion, down 7% from the prior quarter.
Seasonal Challenges
Fourth quarter expected to have seasonal impacts on ROE and custodial balances, potentially affecting financial performance.
Government Shutdown Effects
Impacts of the government shutdown on FHA business and potential increase in forbearance were discussed, indicating potential future challenges.
Increased Corporate Expenses
Corporate expenses increased due to investments in technology and higher performance-based incentive compensation.
Company Guidance
During PennyMac Financial Services' third quarter 2025 earnings call, the company highlighted several key financial metrics and strategic initiatives. PennyMac reported an 18% return on equity (ROE) on both a GAAP and operating basis, showcasing its strong financial performance. The company completed a strategic sale of mortgage servicing rights (MSRs) with an unpaid principal balance of $12 billion to Annaly Capital Management, retaining subservicing, which supports its capital-light subservicing business growth. PennyMac maintained its leadership position in correspondent lending with over $100 billion in UPB of correspondent production and a 20% market share for the first nine months of 2025. The broker direct channel also showed robust growth, achieving nearly 6% market share, with plans to reach over 10% by 2026. The servicing portfolio ended the quarter at $717 billion in UPB, contributing significantly to the company’s earnings. Additionally, PennyMac reported net income of $182 million, or $3.37 in earnings per share, and declared a $0.30 per share dividend. The company aims to maintain high-teens to low-20s annualized operating ROEs through 2026, contingent on stable mortgage and delinquency rates.PennyMac Financial Financial Statement Overview
Summary
PennyMac Financial demonstrates strong profitability with improving revenue growth and margins. However, high leverage and negative cash flows present significant risks. The company needs to focus on improving cash flow management while maintaining profitability to ensure long-term financial stability.Income Statement
PennyMac Financial shows a strong gross profit margin of 98.10% TTM, indicating efficient cost management. The net profit margin improved to 25.21% TTM, reflecting enhanced profitability. Revenue growth rate is positive at 7.67% TTM, reversing previous declines, suggesting a recovery in revenue generation. EBIT and EBITDA margins are robust at 62.13% and 59.79% TTM, respectively, highlighting strong operational performance.75
Positive
Balance Sheet
The debt-to-equity ratio improved to 1.46 TTM from higher levels, indicating better leverage management, though still relatively high. Return on equity is moderate at 12.49% TTM, showing decent profitability for shareholders. The equity ratio is stable, suggesting a balanced asset structure, but the high debt levels pose potential risks.60
Neutral
Cash Flow
Operating cash flow is negative, indicating cash flow challenges, though free cash flow to net income ratio is positive at 1.02 TTM, showing some cash generation capability. Free cash flow growth rate improved to 18.89% TTM, but the overall negative cash flow remains a concern.50
Neutral
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 3.10B | 1.59B | 2.04B | 2.32B | 3.56B | 3.95B |
| Gross Profit | 2.25B | 1.56B | 847.47M | 1.31B | 2.13B | 2.77B |
| EBITDA | 851.57M | 473.17M | 424.06M | 738.93M | 1.40B | 2.28B |
| Net Income | 498.74M | 311.42M | 144.66M | 475.51M | 1.00B | 1.65B |
Balance Sheet | ||||||
| Total Assets | 25.40B | 26.09B | 18.84B | 16.82B | 18.78B | 31.60B |
| Cash, Cash Equivalents and Short-Term Investments | 684.15M | 659.03M | 948.64M | 1.34B | 346.94M | 547.93M |
| Total Debt | 19.40B | 20.55B | 13.49B | 11.80B | 13.99B | 26.89B |
| Total Liabilities | 21.19B | 22.26B | 15.31B | 13.35B | 15.36B | 28.21B |
| Stockholders Equity | 4.21B | 3.83B | 3.54B | 3.47B | 3.42B | 3.39B |
Cash Flow | ||||||
| Free Cash Flow | -1.95B | -4.56B | -1.62B | 5.95B | 2.51B | -6.28B |
| Operating Cash Flow | -1.91B | -4.53B | -1.58B | 6.03B | 2.56B | -6.20B |
| Investing Cash Flow | 497.66M | -1.89B | -273.29M | -721.58M | -304.37M | 783.03M |
| Financing Cash Flow | 1.89B | 5.72B | 1.47B | -4.32B | -2.45B | 5.76B |
PennyMac Financial Technical Analysis
Positive
159.46
Price Trends
132.96
Positive
127.17
Positive
112.61
Positive
Market Momentum
5.50
Negative
86.34
Negative
94.03
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PFSI, the sentiment is Positive. The current price of 159.46 is above the 20-day moving average (MA) of 138.57, above the 50-day MA of 132.96, and above the 200-day MA of 112.61, indicating a bullish trend. The MACD of 5.50 indicates Negative momentum. The RSI at 86.34 is Negative, neither overbought nor oversold. The STOCH value of 94.03 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for PFSI.
PennyMac Financial Risk Analysis
PennyMac Financial disclosed 63 risk factors in its most recent earnings report. PennyMac Financial reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
PennyMac Financial Peers Comparison
UnderperformOutperform
Sector (68)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
69 Neutral | $8.29B | 17.17 | 12.55% | 0.90% | 25.42% | 190.85% | |
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% | |
55 Neutral | $9.84B | -677.78 | 11.37% | 8.64% | -8.66% | ― | |
54 Neutral | $65.44B | 292.70 | -2.15% | ― | 22.56% | ― | |
47 Neutral | $1.07B | -8.69 | -25.72% | ― | 3.91% | 27.78% |
* Financial Sector Average
PFSI
PennyMac Financial
159.46
51.67
47.94%
LDI
loanDepot
3.20
1.40
77.78%
UWMC
UWM Holding
6.10
0.35
6.09%
RKT
Rocket Companies
23.24
11.91
105.12%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.