Is Rocket Companies a buy?
It’s time to breakdown a name of the financial world. Here is the breakdown on $RKT, otherwise known as Rocket Companies.
Current Price: $21.54
52/Wk Highs: $34.42
52/Wk Low: $17.50
Market Cap: $42.7 Billion
Read below for the breakdown!
Rocket Companies ($RKT) is a major holding company consisting of major financial services entities such as Rocket Mortgage, Rocket Homes, and Rocket Auto.
In more general terms, Rocket Companies provides financial services for customers throughout many industries such as the real estate and auto industries.
Taking a brief look at Rocket Companies history, $RKT went public in mid-2020, eventually then moving to a low thereafter. Up until recently, the stock has been largely inactive, but given the company’s upcoming earnings many are led to wonder if Rocket is a buy.
In recent news, the stock also received a boost from the announcement that Rocket Mortgage launched a Mortgage Broker Directory, leading shares higher.
Not only that, but Rocket has recently formed partnerships with an impressive lineup of companies, including Realtor.com and Charles Schwab, both of which give Rocket Companies a broader base of customers.
Lastly, one of the most recent developments was Rocket Companies announcement that the Rocket board of directors approved a $1 billion share repurchase program.
Digging into the numbers, Rocket delivered a Q3 2020 beat, with an EPS of $1.21, better than the expected EPS analyst’s consensus estimate of $1.09. The positivity did not stop there though.
As for revenues, total revenues landed at $4.634 billion, representing a 186% gain when compared to the Q3 2019 total revenues level of $1.620 billion. Net income also increased to $2.995 billion, representing a huge 506% increase on a year over year basis.
Rocket further impressed on earnings, with Q3 closed loan origination volume totaling $88.982 billion, representing a 122% gain, while gain on net margin increased by 37% to 4.52% in Q3 of 2020.
When it comes to costs, Rocket Companies reported an increase in total expenses by 46%, totaling $1.639 billion, which is to be expected given the company’s solid growth throughout the quarter.
Management was upbeat about the quarter.
“In the midst of the pandemic, we were able to help an unprecedented number of Americans buy and refinance homes, providing financial relief through our techdriven platform and award-winning service.” CEO Jay Farner said.
Rounding out the quarter, it is important to note that the company assisted more clients in the third quarter than any other quarter in its history, only going to show Rocket Companies continues to grow.
Management also delivered guidance for Q4, which maintains Rocket’s bullish outlook. The company expects closed loan volume to land between $88 billion and $93 billion, which represents an increase of 73% to 83%.
Furthermore, management expects net rate lock volume to total $80 billion to $87 billion in Q4, representing an 82% increase. Finally, gain on sale margins is expected to land between 3.80% and 4.10%, which is an 11% to 20% improvement for Q4.
Shifting into the balance sheet the numbers are not bad.
Total Debt: $29.471 Billion
Total Liabilities: $37.422 Billion
Total Assets: $37.753 Billion
Cash & Short Term Inv: $3.485 Billion
On a valuation basis, Rocket Companies does trade at a premium.
Price to Book: 128.18x
Price to Cash Flow: 3.51x
Given the numbers, the analysts are bullish, with a mean price target of $24.55/share, representing a 13.97% upside.
It is also important to note that the high price target is $30.00/share, representing a 39.28% gain, while the low price target is $19.00/share, representing a -11.79% downside.
The big money is quite involved as well with 66.91% of Rocket Companies being owned by institutions. Top holders include Invesco Advisers, Caledonia Investments, and The Vanguard Group.
On a technical basis, Rocket Companies has been mostly flat but recently grew bullish. According to the six-month charts the MACD is currently trending to the upside with significant momentum within a range of 0.3140 down to 0.1222.
The six-month charts are also indicating an RSI of 54.16 and CCI of 55.97, both of which are on the higher end.
In short, Rocket Companies is a solid long term pick with consistent long term growth, a strong customer base, and solid partnerships with other major companies.
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Disclaimer: This is not direct financial advice, simply an opinion based on independent research.