Rithm Capital Corp. (RITM) Hits Fresh High: Is There Still Room to Run?
Have you been paying attention to shares of Rithm (RITM)? Shares have been on the move with the stock up 9.3% over the past month. The stock hit a new 52-week high of $10.34 in the previous session. Rithm has gained 25.7% since the start of the year compared to the 8.5% move for the Zacks Finance sector and the 9% return for the Zacks Financial - Miscellaneous Services industry.
What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on August 2, 2023, Rithm reported EPS of $0.62 versus consensus estimate of $0.34.
For the current fiscal year, Rithm is expected to post earnings of $1.52 per share on $3.42 billion in revenues. This represents a 16.03% change in EPS on a 6.14% change in revenues. For the next fiscal year, the company is expected to earn $1.57 per share on $3.46 billion in revenues. This represents a year-over-year change of 3.29% and 1.08%, respectively.
Valuation Metrics
Rithm may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.
On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.
Rithm has a Value Score of A. The stock's Growth and Momentum Scores are A and B, respectively, giving the company a VGM Score of A.
In terms of its value breakdown, the stock currently trades at 6.8X current fiscal year EPS estimates, which is not in-line with the peer industry average of 11.2X. On a trailing cash flow basis, the stock currently trades at 7.7X versus its peer group's average of 8X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
Zacks Rank
We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Rithm currently has a Zacks Rank of #2 (Buy) thanks to favorable earnings estimate revisions from covering analysts.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Rithm passes the test. Thus, it seems as though Rithm shares could have potential in the weeks and months to come.
How Does RITM Stack Up to the Competition?
Shares of RITM have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Globe Life Inc. (GL). GL has a Zacks Rank of # 2 (Buy) and a Value Score of B, a Growth Score of B, and a Momentum Score of F.
Earnings were strong last quarter. Globe Life Inc. beat our consensus estimate by 1.56%, and for the current fiscal year, GL is expected to post earnings of $10.49 per share on revenue of $5.51 billion.
Shares of Globe Life Inc. have gained 1.6% over the past month, and currently trade at a forward P/E of 10.81X and a P/CF of 7.7X.
The Financial - Miscellaneous Services industry may rank in the bottom 70% of all the industries we have in our universe, but there still looks like there are some nice tailwinds for RITM and GL, even beyond their own solid fundamental situation.
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Rithm Capital Corp. (RITM) : Free Stock Analysis Report
Globe Life Inc. (GL) : Free Stock Analysis Report
