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Rithm Capital Corp. (RITM)
:RITM
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Rithm Capital
(NYSE:RITM)
69Neutral
Positive Factors
Earnings
The current yield of 9% is well covered with forecasted operating earnings in the mid-teens.
Growth Potential
The company is seen as a top pick due to its position as a top-5 mortgage lender/servicer and its potential to capitalize on growth in private credit and asset-based lending.
Valuation
RITM is highlighted as a Holiday Opportunity due to its valuation and potential listing of Newrez, which could re-rate the shares.
Negative Factors
Equity Dilution
Raises $343 million in fresh equity with rates falling, scale opportunities coming together in asset management.
Market Volatility
Flows have picked up broadly for mortgage finance stocks and asset managers as earnings and valuation upside are expected in response to the more supportive interest rate backdrop.
Valuation Challenges
Benchmarking the valuation is tough right now but scaling-up quickly could reinforce/enhance a higher valuation if it settles on highly accretive investment opportunities/acquisitions.
Rithm Capital (RITM) vs. S&P 500 (SPY)
Market Cap
$6.14B
Dividend Yield8.6%
Average Volume (3M)3.91M
Price to Earnings (P/E)7.0
Beta (1Y)0.84
Revenue Growth25.16%
EPS Growth52.40%
CountryUS
Employees6,045
SectorReal Estate
Sector Strength71
IndustryREITs
Share Statistics
EPS (TTM)1.67
Shares Outstanding520,660,100
10 Day Avg. Volume4,025,619
30 Day Avg. Volume3,910,815
Financial Highlights & Ratios
PEG Ratio0.13
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
$13.20Price Target Upside11.96% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering6
Rithm Capital Business Overview & Revenue Model
Company DescriptionNew Residential Investment Corp. is a real estate investment trust, which focuses on investing and actively managing, investments related to residential real estate. It operates through the following segments: Origination, Servicing, MSR Related Investments, Residential Securities and Loans, Consumer Loans and Corporate. The Corporate segment includes general and administrative expenses, the management fees and incentive compensation, and corporate cash and related interest income. The company was founded in 2011 and is headquartered in New York, NY.
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
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.55
Neutral
Balance Sheet
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.60
Neutral
Cash Flow
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.50
Neutral
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| 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
Positive
11.79
Price Trends
11.62
Positive
11.15
Positive
10.93
Positive
Market Momentum
0.01
Positive
52.83
Neutral
71.67
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RITM, the sentiment is Positive. The current price of 11.79 is above the 20-day moving average (MA) of 11.76, above the 50-day MA of 11.62, and above the 200-day MA of 10.93, indicating a bullish trend. The MACD of 0.01 indicates Positive momentum. The RSI at 52.83 is Neutral, neither overbought nor oversold. The STOCH value of 71.67 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive 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 (61)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
69 Neutral | $9.27B | 10.94 | 9.58% | 14.16% | 384.69% | 963700.00% | |
69 Neutral | $6.14B | 6.96 | 12.59% | 8.60% | 25.16% | 52.40% | |
68 Neutral | $12.54B | 13.37 | 8.40% | 11.99% | 13.33% | ― | |
67 Neutral | $1.12B | 13.30 | 6.35% | 12.88% | 26.34% | 79.07% | |
63 Neutral | $1.10B | 12.31 | 6.92% | 10.49% | 7.13% | 64.82% | |
62 Neutral | $1.43B | 5.78 | 13.74% | 13.14% | 28.33% | ― | |
61 Neutral | $4.75B | 18.23 | -3.59% | 10.86% | 6.00% | -21.50% |
* Real Estate Sector Average
Performance Comparison
RITM
Rithm Capital
11.79
1.67
16.50%
AGNC
AGNC Investment
10.13
1.72
20.45%
NLY
Annaly Capital
21.61
4.36
25.28%
CIM
Chimera Investment
13.49
1.52
12.70%
MFA
MFA Financial
10.94
0.93
9.29%
TWO
Two Harbors
13.74
2.56
22.90%
Rithm Capital Earnings Call Summary
Earnings Call Date: Feb 6, 2025 | % Change Since: 2.61% | Next Earnings Date: May 6, 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.