Should You Invest In The Financial Stock Ditech Holding Corporation (NYSE:DHCP)?
Ditech Holding Corporation (NYSE:DHCP), a US$28.00M small-cap, is a financial services company operating in an industry, whose growth is generally driven by economic condition, determining the rate of interest and inflation. Financial services analysts are forecasting for the entire industry, an extremely elevated growth of 36.14% in the upcoming year , and a strong near-term growth of 27.34% over the next couple of years. However, this rate came in below the growth rate of the US stock market as a whole. Today, I’ll take you through the sector growth expectations, as well as evaluate whether Ditech Holding is lagging or leading in the industry. View our latest analysis for Ditech Holding
What’s the catalyst for Ditech Holding’s sector growth?
The mortgage industry is characterized by stable product offerings, consolidation and increasing levels of external competition. Over the past year, the industry saw growth of 8.88%, though still underperforming the wider US stock market. Ditech Holding lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means Ditech Holding may be trading cheaper than its peers.
Is Ditech Holding and the sector relatively cheap?
Mortgage and thrifts companies are typically trading at a PE of 21.99x, relatively similar to the rest of the US stock market PE of 18.37x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a lower 5.65% compared to the market’s 11.18%, potentially indicative of past headwinds. Since Ditech Holding’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Ditech Holding’s value is to assume the stock should be relatively in-line with its industry.
Next Steps:
Ditech Holding recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If the stock has been on your watchlist for a while, now may be the time to buy, if you like its ability to deliver growth and are not highly concentrated in the financial industry. However, before you make a decision on the stock, I suggest you look at Ditech Holding’s fundamentals in order to build a holistic investment thesis.
Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
Historical Track Record: What has DHCP’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Ditech Holding? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
