Rithm Capital (RITM) AI Stock Analysis

• Market Cap: $5.81B
• Dividend Yield: 9.28%
• Average Volume (3M): 6.06M
• Price to Earnings (P/E): 8.5
• Beta (1Y): 0.62
• Revenue Growth: 26.69%
• EPS Growth: 9.10%
• Country: US
• Employees: 6,045
• Sector: Real Estate
• Sector Strength: 53
• Industry: REIT - Mortgage
• EPS (TTM): 0.54
• Shares Outstanding: 530,292,200
• 10 Day Avg. Volume: 6,433,394
• 30 Day Avg. Volume: 6,064,242
• PEG Ratio: 0.11
• Price to Book (P/B): 0.69
• Price to Sales (P/S): 1.78
• P/FCF Ratio: -2.32
• Enterprise Value/Market Cap: 6.74
• Enterprise Value/Revenue: 14.13
• Enterprise Value/Gross Profit: 14.13
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $14.50
• Price Target Upside: 34.51% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 8

• Rating: 68 Neutral
• Price Target: ―

Rithm Capital shows a promising but somewhat mixed outlook. Its strong dividend yield and undervaluation are significant positives, as reflected in its valuation score. However, the company's financial performance presents challenges, particularly in terms of cash flow and high liabilities, which weigh on the score. The earnings call added strategic growth optimism but also highlighted concerns regarding undervaluation and market volatility. Technical indicators suggest positive momentum but also caution due to potential overbought conditions. Overall, while the stock is undervalued and offers a high dividend yield, the financial and operational challenges present significant risks.

Positive Factors

Revenue Growth

Rithm Capital's consistent revenue growth indicates its ability to expand its market presence and enhance its service offerings, which is crucial for long-term sustainability.

Strategic Growth Initiatives

The substantial commitments to Sculptor's Real Estate Fund V highlight Rithm Capital's strategic growth potential, enhancing its asset management capabilities and long-term revenue prospects.

Dividend Yield

A high dividend yield reflects Rithm Capital's strong cash generation ability and commitment to returning value to shareholders, supporting investor confidence and long-term investment appeal.

Negative Factors

Cash Flow Issues

Ongoing cash flow constraints can hinder Rithm Capital's ability to invest in growth opportunities and meet financial obligations, posing a risk to its financial stability and operational flexibility.

High Liabilities

The high level of liabilities relative to assets could strain Rithm Capital's balance sheet, limiting its ability to leverage for growth and increasing financial risk in volatile markets.

Margin Compression

Margin compression in the origination business due to competition can reduce profitability, impacting Rithm Capital's ability to sustain earnings growth and maintain competitive advantage.

Rithm Capital Business Overview & Revenue Model

Company Description

Rithm Capital Corp. provides capital and services to the real estate and financial services sectors in the United States. Its investment portfolio comprises mortgage servicing related assets, residential securities and loans, and consumer loans. It qualifies as a real estate investment trust for federal income tax purposes. The company generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. The company was formerly known as New Residential Investment Corp. and changed its name to Rithm Capital Corp. in August 2022. Rithm Capital Corp. was incorporated in 2011 and is headquartered in New York, New York.

How the Company Makes Money

Rithm 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 exhibits a mixed financial performance. The income statement shows reasonable growth and profitability with a net profit margin of 35% and a revenue growth rate of 9.4%. However, operational challenges are evident with fluctuating EBIT margins. The balance sheet highlights moderate leverage but potential risks due to high liabilities. Cash flow concerns are notable with negative free cash flow, indicating liquidity issues. Overall, while there are growth prospects, financial stability and cash generation remain areas of concern.

Income Statement

Rithm Capital's income statement shows a mixed performance. The TTM (Trailing-Twelve-Months) gross profit margin is approximately 52%, indicating decent profitability. However, the net profit margin stands at 35%, highlighting significant costs or expenses. The revenue growth rate from 2024 to 2025 TTM is about 9.4%, showing positive revenue expansion after a decline from 2023 to 2024. The EBIT and EBITDA margins for TTM are 3.3% and 69.2% respectively, suggesting strong operational efficiency particularly in EBITDA terms. Overall, while profitability metrics show some strengths, the variability in EBIT reflects potential operational challenges.

Balance Sheet

Rithm Capital's balance sheet reveals some concerns. The debt-to-equity ratio is approximately 0.54 in TTM, which is relatively moderate, suggesting a balanced capital structure. The return on equity (ROE) for TTM is 9.02%, indicating moderate returns for shareholders. The equity ratio is about 17.2%, reflecting a lower reliance on equity financing. Despite a solid equity base, the high total liabilities compared to assets could pose risks, affecting the financial stability of the company.

Cash Flow

The cash flow performance of Rithm Capital is challenging. The operating cash flow to net income ratio is negative in TTM, indicating cash flow issues despite reported profits. The free cash flow to net income ratio is also negative, reflecting difficulties in generating cash from operations. The free cash flow growth rate from 2024 to TTM is 48.6%, showing improvement but still in negative territory, suggesting ongoing cash flow constraints.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	2.77B	3.02B	3.76B	3.82B	3.04B	-21.34M
Gross Profit	2.77B	3.02B	2.97B	2.58B	1.92B	-131.55M
EBITDA	0.00	0.00	2.18B	2.06B	1.42B	0.00
Net Income	710.67M	931.50M	622.26M	954.52M	772.23M	-1.36B
Balance Sheet
Total Assets	45.33B	46.05B	39.72B	32.48B	39.74B	33.25B
Cash, Cash Equivalents and Short-Term Investments	0.00	11.17B	267.50K	2.15B	10.73B	15.19B
Total Debt	32.42B	32.79B	26.96B	21.90B	29.78B	25.73B
Total Liabilities	37.19B	38.16B	32.62B	25.47B	30.22B	27.82B
Stockholders Equity	7.78B	7.79B	7.01B	6.94B	6.60B	5.32B
Cash Flow
Free Cash Flow	420.09M	-2.32B	693.60M	6.87B	2.86B	1.32B
Operating Cash Flow	550.61M	-2.19B	693.60M	6.87B	2.88B	1.86B
Investing Cash Flow	320.58M	-2.43B	216.72M	198.25M	2.31B	8.65B
Financing Cash Flow	-338.61M	4.83B	-842.55M	-6.98B	-4.74B	-10.11B

Rithm Capital Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 10.78
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Positive
• RSI: Positive
• STOCH: Positive

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 10.78 is below the 20-day moving average (MA) of 11.44, below the 50-day MA of 11.82, and below the 200-day MA of 11.04, indicating a bearish trend. The MACD of -0.29 indicates Positive momentum. The RSI at 26.50 is Positive, neither overbought nor oversold. The STOCH value of 8.32 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for RITM.

Rithm Capital Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ABR	74 Outperform	$2.32B	13.69	7.09%	12.67%	-17.43%	-37.71%
RITM	68 Neutral	$5.81B	8.47	10.13%	9.28%	26.69%	9.10%
STWD	67 Neutral	$6.90B	17.28	5.73%	10.37%	-15.07%	-1.00%
Sector *	65 Neutral	$2.17B	12.19	3.79%	4.94%	3.15%	1.96%
BXMT	63 Neutral	$3.16B	―	-0.33%	10.46%	-19.20%	92.16%
AGNC	59 Neutral	$10.58B	31.29	3.98%	14.40%	-18.28%	-10.62%
ARI	52 Neutral	$1.39B	―	-0.35%	10.27%	-26.29%	-342.06%

Rithm Capital Corporate Events

Rithm Capital Reports Strong Q3 Results Amid Leadership Changes

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.