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PennyMac Financial (PFSI)
NYSE:PFSI
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PennyMac Financial
(NYSE:PFSI)
62Neutral
Positive Factors
Debt Structure
Ratings agencies view an 80% unsecured to 20% secured debt mix as positive, and PennyMac Financial Services is working towards this structure.
Market Position
PennyMac Financial Services aims to increase market share in the broker channel to 10%, positioning itself as a strong contender among brokers.
Production Volumes
Total production volumes were up 12.6% quarter over quarter to $35.7 billion.
Negative Factors
Financial Performance
EPS missed consensus estimates as revenue and expenses came in worse than expected.
Interest Rates
Volatile and high mortgage rates create a challenging climate for the mortgage industry, adding uncertainty during the important spring homebuying season.
Return on Equity
Operating ROE fell to 16% with 2025 ROE guidance lowered to mid- to high-teens.
PennyMac Financial (PFSI) vs. S&P 500 (SPY)
Market Cap
$4.95B
Dividend Yield1.12%
Average Volume (3M)475.02K
Price to Earnings (P/E)15.0
Beta (1Y)0.61
Revenue Growth23.79%
EPS Growth121.61%
CountryUS
Employees4,457
SectorFinancial
Sector Strength89
IndustryFinancial - Mortgages
Share Statistics
EPS (TTM)1.42
Shares Outstanding51,663,586
10 Day Avg. Volume353,667
30 Day Avg. Volume475,018
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.00
Price to Cash Flow (P/CF)0.00
P/FCF Ratio0.00
Enterprise Value/Market Cap3.65
Enterprise Value/RevenueN/A
Enterprise Value/Gross Profit11.60
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$122.29Price Target Upside25.28% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering7
PennyMac Financial Business Overview & Revenue Model
Company DescriptionPennyMac Financial Services, Inc. (PFSI) is a leading national financial services company that primarily operates in the mortgage banking and investment management sectors. The company provides a comprehensive range of mortgage solutions, which include mortgage loan production, servicing, and investment management. PennyMac Financial is known for its innovative approach to mortgage lending and servicing, catering to both individual customers and institutional investors.
How the Company Makes MoneyPennyMac Financial generates revenue through several key streams. Primarily, it earns money by originating and servicing mortgage loans. Loan origination involves underwriting and funding mortgages, from which the company earns origination fees. Additionally, PennyMac services a large portfolio of mortgage loans, collecting servicing fees for managing these loans on behalf of investors or other financial institutions. The company also profits from investment management activities, which involve managing mortgage-backed securities and other investments for institutional clients. Furthermore, PennyMac benefits from strategic partnerships with banks and other financial entities that enhance its market reach and operational capabilities.
PennyMac Financial Financial Statement Overview
Summary
PennyMac Financial shows a mixed financial performance. While revenue and gross profit margins are strong, net profit margins and cash flow performance raise concerns about profitability and liquidity. The high leverage ratio on the balance sheet suggests potential vulnerability to external economic pressures, though the company is maintaining a stable equity position.Income Statement
The company's recent revenue growth is positive, with a TTM revenue increase from the previous year. Gross profit margins are strong and have been improving, indicating efficient cost management. However, net profit margins have decreased over the years, suggesting increased expenses or lower profitability in net terms. The EBIT margin is robust, but EBITDA margin shows some volatility, possibly due to fluctuating depreciation or amortization costs.65
Positive
Balance Sheet
The debt-to-equity ratio is high, indicating significant leverage which could pose a risk in adverse economic conditions. However, the company maintains a stable equity ratio, suggesting a reasonable level of equity financing in its asset base. Return on equity is moderate, reflecting a balanced use of shareholder equity for generating net income. Overall, the balance sheet shows potential risks associated with high debt levels.55
Neutral
Cash Flow
The company is experiencing negative operating cash flow in recent periods, which is a concern for liquidity. Free cash flow has also been negative, driven by large capital expenditures and operating cash outflows. The operating cash flow to net income ratio is unfavorable, indicating cash flow generation issues relative to net income. These factors raise concerns about the company's short-term financial flexibility and ability to fund operations internally.45
Neutral
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 1.59B | 2.04B | 1.97B | 3.98B | 5.45B | Gross Profit |
| 1.56B | 1.94B | 663.10M | 2.14B | 3.97B | EBIT |
| 901.03M | 1.03B | 615.01M | 1.32B | 2.20B | EBITDA |
| 473.17M | 424.06M | 665.25M | 1.36B | 2.24B | Net Income Common Stockholders |
| 311.42M | 144.66M | 475.51M | 1.00B | 1.65B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 659.03M | 948.64M | 1.34B | 346.94M | 547.93M | Total Assets |
| 26.09B | 18.84B | 16.82B | 18.78B | 31.60B | Total Debt |
| 20.55B | 13.49B | 11.80B | 13.99B | 26.89B | Net Debt |
| 20.32B | 12.55B | 10.47B | 13.65B | 26.36B | Total Liabilities |
| 22.26B | 15.31B | 13.35B | 15.36B | 28.21B | Stockholders Equity |
| 3.83B | 3.54B | 3.47B | 3.42B | 3.39B |
| Cash Flow | Free Cash Flow | |||
| -4.56B | -1.62B | 5.95B | 2.51B | -6.28B | Operating Cash Flow |
| -4.53B | -1.58B | 6.03B | 2.56B | -6.20B | Investing Cash Flow |
| -1.89B | -273.29M | -721.58M | -304.37M | 783.03M | Financing Cash Flow |
| 5.72B | 1.47B | -4.32B | -2.45B | 5.76B |
PennyMac Financial Technical Analysis
Neutral
97.61
Price Trends
98.17
Negative
100.73
Negative
102.39
Negative
Market Momentum
-0.11
Negative
51.20
Neutral
71.07
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PFSI, the sentiment is Neutral. The current price of 97.61 is above the 20-day moving average (MA) of 96.16, below the 50-day MA of 98.17, and below the 200-day MA of 102.39, indicating a neutral trend. The MACD of -0.11 indicates Negative momentum. The RSI at 51.20 is Neutral, neither overbought nor oversold. The STOCH value of 71.07 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for PFSI.
PennyMac Financial Risk Analysis
PennyMac Financial disclosed 63 risk factors in its most recent earnings report. PennyMac Financial reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
PennyMac Financial Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
84 Outperform | $5.44B | 8.22 | 14.09% | 2.02% | 4.33% | 10.21% | |
79 Outperform | $6.18B | 8.66 | 15.12% | 1.92% | 4.64% | 15.36% | |
78 Outperform | $4.51B | 8.62 | 13.22% | 2.92% | 2.95% | 4.08% | |
78 Outperform | $6.00B | 8.54 | 13.29% | 1.96% | 11.88% | 5.54% | |
64 Neutral | $12.57B | 9.74 | 7.88% | 16985.68% | 12.42% | -5.45% | |
62 Neutral | $4.95B | 14.98 | 9.32% | 1.12% | 23.79% | 121.61% |
* Financial Sector Average
Performance Comparison
PFSI
PennyMac Financial
97.61
5.34
5.79%
MTG
MGIC Investment
26.17
5.36
25.76%
RDN
Radian Group
33.53
2.81
9.15%
ESNT
Essent Group
58.53
2.92
5.25%
ACT
Enact Holdings
36.13
5.13
16.55%
PennyMac Financial Earnings Call Summary
Earnings Call Date:Apr 22, 2025
(Q1-2025)
| % Change Since: 1.26%|
Next Earnings Date:Jul 30, 2025
Earnings Call Sentiment Neutral
The earnings call presents a mixed picture. On the positive side, there is strong growth in the servicing portfolio, significant strategic partnerships, and improvements in technology and operational efficiency. However, these are counterbalanced by declines in the Production segment, a decrease in MSR fair value, elevated hedge costs, and tightened margins due to increased competition. The company remains optimistic about its ability to navigate the current economic landscape and continue its strategic growth.Q1-2025 Updates
Positive Updates
Strong Servicing Portfolio Growth
Servicing portfolio reached $680 billion in unpaid principal balance with 2.7 million households, demonstrating sustained growth despite high mortgage rates.
Strategic Partnership with Team USA
Announced a four-year partnership with Team USA and the LA28 Olympic and Paralympic Games to enhance brand visibility and customer engagement.
Technology and Efficiency Improvements
Significant investments in technology and AI have led to improved efficiency and reduced costs, such as a 45,000-hour annualized savings from servicing customer interaction systems.
Resilient Financial Model
Operating returns on equity in the mid-teens during periods of higher rates, with the potential for increased returns when mortgage rates decline.
Subservicing Market Expansion
Signed first three clients and actively engaged with 20 additional prospects, representing approximately $65 billion in UPB.
Negative Updates
Production Segment Decline
Pretax income in the Production segment was $62 million, down from $78 million in the prior quarter due to a 19% decline in acquisition and origination volumes.
MSR Fair Value Decline
The fair value of PFSI's MSR decreased by $205 million in the first quarter due to lower market interest rates and faster-than-modeled prepayments.
Increased Hedge Costs
Hedge costs have been elevated in the second quarter due to significant interest rate volatility.
Tightened Margins
Overall margins in the quarter have been tighter than in the first quarter, with increased competition leading to more aggressive pricing.
Company Guidance
During the first quarter of 2025 earnings call for PennyMac Financial Services Inc., the company reported a net income of $76 million, translating to diluted earnings per share of $1.42 and an annualized return on equity (ROE) of 8%. Excluding fair value changes, the annualized operating ROE was 15%. The company's servicing portfolio grew to $680 billion in unpaid principal balance (UPB), servicing 2.7 million households. Loan originations and acquisitions totaled $29 billion in UPB. The company announced a strategic four-year partnership with Team USA and the LA28 Olympic and Paralympic Games, which is expected to enhance brand engagement and customer acquisition. PennyMac maintained its position as the second-largest producer of mortgage loans and the sixth-largest servicer in the country, with total acquisition and origination volumes of $29 billion, including $26 billion for its account and $3 billion as fee-based fulfillment for PennyMac Mortgage Investment Trust (PMT). The company highlighted its strong performance in the servicing segment, with a pretax income of $76 million, and operating expenses reaching an all-time quarterly low. Additionally, PFSI's robust hedging strategy and technology investments were emphasized as key components for navigating the volatile interest rate environment.PennyMac Financial Corporate Events
Private Placements and Financing
PennyMac Financial Closes $850M Senior Notes Offering
Positive
May 8, 2025
On May 8, 2025, PennyMac Financial Services closed an offering of $850 million in 6.875% Senior Notes due 2032. The proceeds will be used to redeem existing notes and repay borrowings, impacting the company’s financial structure and potentially enhancing its market position.
Spark’s Take on PFSI Stock
According to Spark, TipRanks’ AI Analyst, PFSI is a Neutral.
PennyMac Financial’s overall score reflects mixed financial performance with strong revenue growth but concerns over net margins and cash flow. Technical analysis suggests moderate momentum, while valuation appears fair with potential for moderate returns. The earnings call provided a mixed outlook, with strong servicing growth and strategic initiatives balanced by challenges in production and margins.
To see Spark’s full report on PFSI stock, click here.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.