In a report published Tuesday, FBR & Co. analyst Paul Miller moved PennyMac Mortgage Investment Trust (NYSE: PMT) to the FBR Top Picks list and reiterated an Outperform rating.
Miller noted PennyMac's consistent net spread in a time of “significant” mortgage market volatility. The analyst wrote, “While we believe the stock has been hurt by investors lumping it in with other mortgage companies, we believe PMT is best positioned in our coverage universe to perform strongly given the company's earnings are actually relatively isolated from gain-on-sale-related income given a healthy pace of investment activity and fluid expense base relative to mortgage companies that have operational capabilities.”
Over the next six to 12 months, FBR sees the company benefiting from more sellers, a greater selection of products and growing market share. The analyst forecasts market share growing approximately three percent on a $1.4 trillion mortgage market from the current two percent.
Miller added, “While the pricing for whole loans has been steadily ticking up over the last year as competition has increased significantly, values on loans relative to par remain attractive for companies with well- structured servicing platforms that gain economics on both sides.”
The analyst estimates YE14 and YE15 book value of $21.23 and $21.62, respectively. FBR's 4Q13 existing book value us $20.82.
Shares of PennyMac Mortgage Investment Trust closed at $23.25 on Monday.
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