Rocket Companies Inc. (RKT) — Inexpensive With Poor Growth Indicators

Over the last year, Rocket Companies logged a -3.3% change, with its stock price reaching a high of $11.38 and a low of $5.97. Over the same period, the stock outperformed the S&P 500 index by 3.0%. More recently, the company's 50-day average price was $8.76. Rocket Companies, Inc., a fintech holding company, provides mortgage lending, title and settlement services, and other financial technology services in the United States and Canada. Based in Detroit, MI, the small-cap Finance company has 18,500 full time employees. Rocket Companies has not offered a dividend during the last year.

Exceptional EPS Growth at the Expense of a Highly Leveraged Balance Sheet:

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue $4,983,046 $15,548,881 $12,683,726 $5,684,897
Interest Income -$21,019 -$102,231 -$61,800 $30,607
Net Margins 17.94% 1.27% 2.43% 0.82%
Net Income $893,754 $197,951 $308,210 $46,421
Depreciation & Amort. -$74,952 -$74,316 -$74,713 -$94,020
Earnings Per Share $0.0 $1.76 $2.32 $1.802
Diluted Shares 101,213 116,238 1,989,434 1,987,300
Free Cash Flow -$7,008,093 -$1,783,716 $7,441,110 $10,715,731
Capital Expenditures -$48,842 -$106,346 -$302,818 -$107,764
Long Term Debt $5,170,333 $21,307,575 $18,704,517 $8,283,014
Net Debt / EBITDA 4.0 38.89 29.86 35.49

Rocket Companies Shares Are Inexpensive:

Rocket Companies has a trailing twelve month P/E ratio of 4.9, compared to an average of 14.34 for the Finance sector. Based on its EPS guidance of $0.5, the company has a forward P/E ratio of 17.5. The inf% compound average growth rate of Rocket Companies's historical and projected earnings per share yields a PEG ratio of 0.0. This suggests that its shares are undervalued. Furthermore, Rocket Companies is likely overvalued compared to the book value of its equity, since its P/B ratio of 1.9 is higher than the sector average of 1.57. The company's shares are currently trading -27.3% below their Graham number.

Rocket Companies Has an Analyst Consensus that Shares Are Overpriced:

The 13 analysts following Rocket Companies have set target prices ranging from $6.0 to $10.0 per share, for an average of $7.69 with a hold rating. As of April 2023, the company is trading 13.9% away from its average target price, indicating that there is an analyst belief that shares are overpriced.

Rocket Companies has an unusually large proportion of its shares sold short because 27.0% of the company's shares are sold short. Institutions own 71.5% of the company's shares, and the insider ownership rate stands at 4.92%, suggesting a large amount of insider shareholders. The largest shareholder is the Vanguard Group, Inc., whose 9% stake in the company is worth $97,489,811.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.