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Rithm Capital (RITM)
NYSE:RITM
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Rithm Capital (RITM) AI Stock Analysis

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RITM

Rithm Capital

(NYSE:RITM)

Rating:68Neutral
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
Earnings and Growth
Strong earnings and scale in the mortgage business add muscle to asset management objectives, supporting analyst recommendation to stay BUY.
Loan Growth
Healthy loan growth in Newrez is expected to support a rally in the stock.
Market Positioning
The stock remains a favorite way to buy a turnaround/growth story in an asset manager, with an option to unlock higher returns and valuation improvement if interest rates fall.
Negative Factors
Business Strategy Concerns
Management dismissed the idea of spinning out the mortgage business at Newrez, which had been part of the analyst's thesis.
Interest Rate Volatility
Interest rate volatility has a similar effect on RITM as on other lenders, dragging on gain-on-sale margins.
Valuation Concerns
Analysts believe there is a disconnect from these return levels and the stock trading at a discount to book value and only 5x 2026E earnings.

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

Rithm Capital Business Overview & Revenue Model

Company DescriptionRithm 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 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 Earnings Call Summary

Earnings Call Date:Jul 28, 2025
(Q2-2025)
|
% Change Since: 0.57%|
Next Earnings Date:Nov 04, 2025
Earnings Call Sentiment Positive
Rithm Capital reported a strong quarter with significant growth in asset management and origination businesses. The company continues to expand its service offerings and technological capabilities. However, it faces challenges such as market competition leading to margin compression and concerns about market undervaluation. The strategic focus remains on growth and managing capital efficiently.
Q2-2025 Updates
Positive Updates
Record Quarter for Genesis
Genesis, Rithm's RTL lender, reported a record quarter of production, more than doubling origination since its acquisition in 2022 and tripling earnings.
Strong Asset Management Growth
Rithm's asset management teams, including Sculptor and Rithm Asset Management, saw inflows across real estate and ABF products, with a recently announced SMA potentially reaching $1.5 billion in RTL loans.
Significant Increase in Asset Management AUM
Sculptor's AUM grew by $3.5 billion since closing, with continued fundraising momentum across various products.
Newrez: Growing Mortgage Servicing
Newrez's servicing portfolio grew to $864 billion, driven by third-party servicing increases and strategic growth initiatives.
Financial Performance Metrics
GAAP net income for the quarter was $283.9 million, with a return on equity of 17% and earnings available for distribution at $291.1 million, indicating an 18% return on equity.
Technological Advancements
Significant gains were reported from Rezi AI investments, enhancing operational efficiency and customer experience.
Negative Updates
Market Competition and Margin Compression
Newrez faced margin compression due to market competition, although it was able to grow market share.
Valuation Concerns
Despite strong performance across business lines, there is a sentiment that Rithm is undervalued in the market.
High Costs in MSR Bulk Purchases
Concerns were expressed about the high cost of purchasing bulk MSRs at 6.5 multiples, impacting strategic decisions.
Company Guidance
During the Rithm Capital Second Quarter 2025 Earnings Conference Call, the company reported robust financial performance and strategic growth initiatives. Rithm Capital achieved a GAAP net income of $283.9 million, translating to $0.53 per diluted share, and a return on equity of 17%. The earnings available for distribution were $291.1 million or $0.54 per diluted share, with an 18% return on equity. The servicing portfolio exceeded $850 billion, and the company secured a record amount of cash and liquidity at $2.1 billion. Rithm's asset management segment, including Sculptor, saw inflows, with a particular focus on real estate and asset-based finance (ABF) products. The company emphasized its competitive edge in sourcing and controlling both origination and servicing processes. Rithm also highlighted a new strategic separate managed account (SMA) for residential transition loans, potentially reaching $1.5 billion. The company expressed a strong commitment to expanding its asset management platform, exploring M&A opportunities, and growing its earnings and synergies across its business lines.

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
62
Positive
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
58
Neutral
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
47
Neutral
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.
BreakdownTTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue2.77B3.02B3.76B3.82B3.04B-21.34M
Gross Profit2.77B3.02B2.97B2.58B1.92B-131.55M
EBITDA0.000.002.18B2.06B1.42B0.00
Net Income710.67M931.50M622.26M954.52M772.23M-1.36B
Balance Sheet
Total Assets45.33B46.05B39.72B32.48B39.74B33.25B
Cash, Cash Equivalents and Short-Term Investments0.000.00267.50K2.15B10.73B15.19B
Total Debt32.42B32.79B26.96B21.90B29.78B25.73B
Total Liabilities37.19B38.16B32.62B25.47B30.22B27.82B
Stockholders Equity7.78B7.79B7.01B6.94B6.60B5.32B
Cash Flow
Free Cash Flow420.09M-2.32B693.60M6.87B2.86B1.32B
Operating Cash Flow550.61M-2.19B693.60M6.87B2.88B1.86B
Investing Cash Flow320.58M-2.43B216.72M198.25M2.31B8.65B
Financing Cash Flow-338.61M4.83B-842.55M-6.98B-4.74B-10.11B

Rithm Capital Technical Analysis

Technical Analysis Sentiment
Positive
Last Price12.26
Price Trends
50DMA
11.48
Positive
100DMA
11.12
Positive
200DMA
10.84
Positive
Market Momentum
MACD
0.21
Positive
RSI
65.69
Neutral
STOCH
35.90
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 12.26 is above the 20-day moving average (MA) of 12.03, above the 50-day MA of 11.48, and above the 200-day MA of 10.84, indicating a bullish trend. The MACD of 0.21 indicates Positive momentum. The RSI at 65.69 is Neutral, neither overbought nor oversold. The STOCH value of 35.90 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 (58)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
73
Outperform
$2.15B12.687.09%13.49%-17.43%-37.71%
68
Neutral
$6.39B9.3210.13%8.16%26.78%-19.34%
67
Neutral
$7.19B20.374.90%9.91%-15.62%-31.74%
67
Neutral
$9.67B29.203.98%15.19%-18.28%-10.62%
63
Neutral
$3.20B-0.33%10.09%-20.46%-1436.71%
62
Neutral
$13.17B20.415.94%12.99%2.32%
58
Neutral
₹166.51B42.187.95%0.62%14.56%0.70%
* Real Estate Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
RITM
Rithm Capital
12.26
2.25
22.48%
AGNC
AGNC Investment
9.60
1.00
11.63%
NLY
Annaly Capital
20.79
3.59
20.87%
ABR
Arbor Realty
11.79
-0.20
-1.67%
BXMT
Blackstone Mortgage
18.88
3.32
21.34%
STWD
Starwood Property
19.59
2.03
11.56%

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
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.Date of analysis: May 04, 2025