Rithm Capital (RITM) AI Stock Analysis

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Rithm Capital

(NYSE:RITM)

61Neutral

Rithm Capital's overall stock score reflects a complex picture. The company shows strong earnings growth and strategic initiatives, as highlighted in the earnings call. However, financial performance is mixed, with challenges in revenue and leverage. Technical analysis suggests bearish momentum, while valuation metrics indicate potential undervaluation. The combination of these factors results in a moderate score, acknowledging both opportunities and risks.

Positive Factors

Dividend Yield

The current yield of 9% is well covered with forecasted operating earnings in the mid-teens.

Valuation

The shares are considered undervalued based on price-to-book value and theoretical sum-of-the-parts basis.

Negative Factors

Market Volatility

There is significant interest in the company's floating-rate preferred shares, which offer an attractive yield and are well-supported by cash flow.

Strategic Changes

A potential spinoff of the originator/servicer could enhance value and lead to stronger earnings at the REIT and asset manager.

Rithm Capital (RITM) vs. S&P 500 (SPY)

Market Cap

$5.38B

Dividend Yield9.86%

Average Volume (3M)5.60M

Price to Earnings (P/E)6.1

Beta (1Y)0.69

Revenue Growth25.16%

EPS Growth52.40%

CountryUS

Employees6,045

SectorReal Estate

Sector Strength79

IndustryREIT - Mortgage

Share Statistics

EPS (TTM)1.67

Shares Outstanding530,315,100

10 Day Avg. Volume8,244,134

30 Day Avg. Volume5,599,181

Financial Highlights & Ratios

PEG Ratio0.12

Price to Book (P/B)N/A

Price to Sales (P/S)1.20

Price to Cash Flow (P/CF)-0.90

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$13.17

Price Target Upside29.88% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering7

Rithm Capital Business Overview & Revenue Model

Company DescriptionRithm Capital (RITM) is a diversified real estate investment trust (REIT) primarily engaged in the mortgage and financial services sectors. The company focuses on managing and investing in residential mortgage-related assets and mortgage servicing rights (MSRs), aiming to generate attractive risk-adjusted returns for its investors. Rithm Capital operates through its various subsidiaries to provide a comprehensive range of mortgage-related services, including origination, servicing, and real estate management.

How the Company Makes MoneyRithm Capital generates revenue primarily from its investment in mortgage servicing rights (MSRs), residential mortgage loans, and real estate securities. By managing MSRs, the company earns fees for servicing loans, which involves collecting and processing mortgage payments, maintaining escrow accounts, and managing late payment processes. Additionally, Rithm Capital invests in residential mortgage-backed securities (RMBS) and other real estate-related investments, generating income through interest and capital appreciation. The company's strategic partnerships with other financial institutions and its diversified investment portfolio play a significant role in enhancing its revenue streams and achieving sustainable growth.

Rithm Capital Financial Statement Overview

Summary

Rithm Capital's financial statements reflect a company with mixed financial health. While net income has grown, revenue and operational margins face challenges. The balance sheet shows improved equity strength but remains leveraged. Cash flow stability is evident, though recent operational cash flow concerns pose risks to future liquidity.

Income Statement

Neutral

Rithm Capital exhibits a mixed performance in its income statement. The company experienced a significant decline in total revenue from 2023 to 2024, leading to a negative EBIT and EBITDA in 2024. However, the net income in 2024 has increased from the previous year. The gross profit margin improved slightly, reflecting better cost management. Overall, the company shows potential in profitability, but the recent revenue decline and negative EBIT margins indicate challenges in operational efficiency.

Balance Sheet

Neutral

The balance sheet of Rithm Capital shows strengths in stockholders' equity growth and a decrease in total debt, improving the debt-to-equity ratio. However, the company maintains a high level of total liabilities relative to its assets, signaling potential leverage risks. The equity ratio has improved over the years, suggesting a stronger capital structure. Stability is achieved through increased equity, but the high leverage remains a concern.

Cash Flow

Neutral

Cash flow analysis for Rithm Capital highlights stability in free cash flow generation over the years, despite the absence of operating cash flow in 2024. The free cash flow to net income ratio has been consistent, showcasing effective cash management. However, the lack of operating cash flow in 2024 presents a risk regarding the sustainability of cash generation. Historical fluctuations in cash flow figures suggest potential volatility.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
1.83B	3.76B	3.82B	3.04B	-21.34M
	Gross Profit
690.98M	2.97B	2.58B	1.92B	-131.55M
	EBIT
-176.26M	2.15B	1.80B	930.45M	-1.39B
	EBITDA
-176.26M	2.18B	2.06B	1.42B	0.00
	Net Income Common Stockholders
835.05M	622.26M	954.52M	772.23M	-1.36B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
1.46B	267.50K	2.15B	10.73B	15.19B
	Total Assets
46.05B	39.72B	32.48B	39.74B	33.25B
	Total Debt
4.35B	26.96B	21.90B	29.78B	25.73B
	Net Debt
2.89B	25.68B	20.57B	28.45B	24.79B
	Total Liabilities
38.16B	32.62B	25.47B	30.22B	27.82B
	Stockholders Equity
7.79B	7.01B	6.94B	6.60B	5.32B
Cash Flow		Free Cash Flow
-2.32B	693.60M	6.87B	2.86B	1.32B
	Operating Cash Flow
-2.19B	693.60M	6.87B	2.88B	1.86B
	Investing Cash Flow
0.00	216.72M	198.25M	2.31B	8.65B
	Financing Cash Flow
4.83B	-842.55M	-6.98B	-4.74B	-10.11B

Rithm Capital Technical Analysis

Technical Analysis Sentiment

Negative

Last Price10.14

Price Trends

50DMA

11.22

Negative

100DMA

10.99

Negative

200DMA

10.73

Negative

Market Momentum

MACD

-0.38

Positive

RSI

40.77

Neutral

STOCH

52.14

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RITM, the sentiment is Negative. The current price of 10.14 is below the 20-day moving average (MA) of 10.71, below the 50-day MA of 11.22, and below the 200-day MA of 10.73, indicating a bearish trend. The MACD of -0.38 indicates Positive momentum. The RSI at 40.77 is Neutral, neither overbought nor oversold. The STOCH value of 52.14 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for RITM.

Rithm Capital Risk Analysis

Rithm Capital disclosed 113 risk factors in its most recent earnings report. Rithm Capital 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

Rithm Capital Peers Comparison

Overall Rating

UnderperformOutperform

Sector (59)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ABR	71 Outperform	$2.09B	9.35	8.62%	15.59%	-11.26%	-33.80%
STWD	66 Neutral	$6.27B	16.87	5.55%	10.34%	-0.97%	3.75%
NLY	64 Neutral	$10.46B	10.80	8.40%	14.80%	13.33%	―
RITM	61 Neutral	$5.38B	6.07	12.59%	9.86%	25.16%	52.40%
BXMT	60 Neutral	$3.15B	―	-5.01%	11.06%	-12.86%	-182.05%
Sector *	59 Neutral	$2.71B	11.52	0.08%	8691.97%	5.56%	-16.56%
AGNC	57 Neutral	$7.63B	8.97	9.58%	17.27%	384.69%	963700.00%

* Real Estate Sector Average

Performance Comparison

RITM

Rithm Capital

10.14

0.15

1.50%

AGNC

AGNC Investment

8.34

0.40

5.04%

NLY

Annaly Capital

17.90

1.89

11.81%

ABR

Arbor Realty

11.03

-0.22

-1.96%

BXMT

Blackstone Mortgage

18.35

1.46

8.64%

STWD

Starwood Property

18.56

0.89

5.04%

Rithm Capital Earnings Call Summary

Earnings Call Date: Feb 6, 2025 | % Change Since: -9.79% | Next Earnings Date: Apr 25, 2025

Earnings Call Sentiment Positive

The earnings call reflects a very strong performance across multiple business lines, with significant growth and strategic initiatives in place for future expansion. However, there are ongoing challenges such as undervaluation and uncertainties in market conditions.

Highlights

Record Earnings Growth

Achieved 76% earnings growth since Q1 2021 and year-over-year growth in earnings by 27%.

Strong Performance in NewRez

NewRez delivered a strong quarter with a 20% ROE and $1 billion in pretax income for 2024, up 26% year-over-year.

Sculptor Acquisition Success

One year post-acquisition, Sculptor shows great returns with the Multistrat Fund achieving 18% gross return and the Tactical Credit Fund achieving 25% gross return.

Growth in Genesis Capital

Genesis Capital increased its origination from $2 billion to $3.6 billion and EBITDA from $40 million to $100 million since acquisition.

Continued Expansion Plans

Announcement of a forthcoming global energy infrastructure platform and focus on growing third-party asset management business.

Lowlights

Undervalued Equity

Despite strong performance, the company's equity is perceived as undervalued in comparison to other asset managers.

Potential Delays in NewRez Listing

Uncertainty around the timeline for potentially listing NewRez, with expectations potentially extending to 2025.

Market Challenges

Concerns about the current state of mortgage credit availability, with expectations that it will remain low.

Company Guidance

During Rithm Capital's fourth quarter and full year 2024 earnings call, the company highlighted significant metrics demonstrating its growth and performance. The company's balance sheet reached $45 billion, with Sculptor contributing an additional $35 billion in assets under management (AUM), culminating in a combined AUM of approximately $80 billion. Rithm Capital reported a year-over-year earnings growth of 27%, with earnings available for distribution amounting to $2.10 per diluted share and a 17% return on equity. The GAAP net income for the full fiscal year was $835 million, or $1.67 per diluted share, representing a 14% return on equity. The company maintained a dividend yield of 9.2%, paying $0.25 per common share, with a book value of $12.56 per share. Additionally, Genesis Capital achieved $3.6 billion in origination and $100 million in EBITDA, while NewRez reported a pretax income of approximately $280 million for Q4, reflecting a 12% increase quarter over quarter and a total funded volume of $59 billion for 2024.

Rithm Capital Corporate Events

Executive/Board ChangesPrivate Placements and FinancingDividendsBusiness Operations and StrategyFinancial Disclosures

Rithm Capital Reports Strong Q3 Results Amid Leadership Changes

Positive

Oct 29, 2024

Rithm Capital Corp. announced strong third-quarter 2024 results, highlighting a GAAP net income of $97 million and earnings available for distribution of $270.3 million. The company maintained a common dividend of $0.25 per share, while also selling 30 million shares for gross proceeds of $340 million. Rithm’s robust performance reflects its strategic focus on operational resilience and value creation for shareholders, showcasing significant growth in its servicing portfolio and origination volume.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

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.