Rithm Capital (RITM) AI Stock Analysis

• Market Cap: $6.19B
• Dividend Yield: 8.57%
• Average Volume (3M): 6.02M
• Price to Earnings (P/E): 9.7
• Beta (1Y): 0.72
• Revenue Growth: 26.78%
• EPS Growth: -19.34%
• Country: US
• Employees: 6,045
• Sector: Real Estate
• Sector Strength: 68
• Industry: REIT - Mortgage
• EPS (TTM): 0.52
• Shares Outstanding: 530,122,500
• 10 Day Avg. Volume: 4,278,395
• 30 Day Avg. Volume: 6,024,131
• PEG Ratio: -0.33
• Price to Book (P/B): 0.79
• Price to Sales (P/S): 0.00
• P/FCF Ratio: -5.20
• Enterprise Value/Market Cap: 6.00
• Enterprise Value/Revenue: 3.72
• Enterprise Value/Gross Profit: 13.41
• Enterprise Value/Ebitda: 60.72
• 1Y Price Target: $13.92
• Price Target Upside: 19.48% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 7

Rithm Capital shows a promising but somewhat mixed outlook. Its strong dividend yield and undervaluation are significant positives, as reflected in its valuation score. However, the company's financial performance presents challenges, particularly in terms of cash flow and high liabilities, which weigh on the score. The earnings call added strategic growth optimism but also highlighted concerns regarding undervaluation and market volatility. Technical indicators suggest positive momentum but also caution due to potential overbought conditions. Overall, while the stock is undervalued and offers a high dividend yield, the financial and operational challenges present significant risks.

Positive Factors

Analyst Recommendations

Analysts are upgrading shares to Overweight, considering them overly discounted.

Financial Performance

Rithm posted a solid operating result, leading to increased analyst confidence.

Growth Prospects

The company's diversified model and large servicing portfolio are expected to perform well even in elevated rate environments.

Upcoming Opportunities

Potential listing of Newrez in 2025 could re-rate the shares.

Negative Factors

Market Valuation

Shares are trading at only 5x 2026E earnings, indicating potential undervaluation.

Valuation Concerns

There is a disconnect from return levels with the stock trading at a discount to book value.

Rithm Capital Business Overview & Revenue Model

Company Description

Rithm Capital (RITM) is a diversified real estate investment trust (REIT) primarily engaged in the mortgage and financial services sectors. The company focuses on managing and investing in residential mortgage-related assets and mortgage servicing rights (MSRs), aiming to generate attractive risk-adjusted returns for its investors. Rithm Capital operates through its various subsidiaries to provide a comprehensive range of mortgage-related services, including origination, servicing, and real estate management.

How the Company Makes Money

Rithm Capital generates revenue primarily from its investment in mortgage servicing rights (MSRs), residential mortgage loans, and real estate securities. By managing MSRs, the company earns fees for servicing loans, which involves collecting and processing mortgage payments, maintaining escrow accounts, and managing late payment processes. Additionally, Rithm Capital invests in residential mortgage-backed securities (RMBS) and other real estate-related investments, generating income through interest and capital appreciation. The company's strategic partnerships with other financial institutions and its diversified investment portfolio play a significant role in enhancing its revenue streams and achieving sustainable growth.

Rithm Capital Financial Statement Overview

Summary

Rithm Capital exhibits a mixed financial performance. The income statement shows reasonable growth and profitability with a net profit margin of 35% and a revenue growth rate of 9.4%. However, operational challenges are evident with fluctuating EBIT margins. The balance sheet highlights moderate leverage but potential risks due to high liabilities. Cash flow concerns are notable with negative free cash flow, indicating liquidity issues. Overall, while there are growth prospects, financial stability and cash generation remain areas of concern.

Income Statement

Rithm Capital's income statement shows a mixed performance. The TTM (Trailing-Twelve-Months) gross profit margin is approximately 52%, indicating decent profitability. However, the net profit margin stands at 35%, highlighting significant costs or expenses. The revenue growth rate from 2024 to 2025 TTM is about 9.4%, showing positive revenue expansion after a decline from 2023 to 2024. The EBIT and EBITDA margins for TTM are 3.3% and 69.2% respectively, suggesting strong operational efficiency particularly in EBITDA terms. Overall, while profitability metrics show some strengths, the variability in EBIT reflects potential operational challenges.

Balance Sheet

Rithm Capital's balance sheet reveals some concerns. The debt-to-equity ratio is approximately 0.54 in TTM, which is relatively moderate, suggesting a balanced capital structure. The return on equity (ROE) for TTM is 9.02%, indicating moderate returns for shareholders. The equity ratio is about 17.2%, reflecting a lower reliance on equity financing. Despite a solid equity base, the high total liabilities compared to assets could pose risks, affecting the financial stability of the company.

Cash Flow

The cash flow performance of Rithm Capital is challenging. The operating cash flow to net income ratio is negative in TTM, indicating cash flow issues despite reported profits. The free cash flow to net income ratio is also negative, reflecting difficulties in generating cash from operations. The free cash flow growth rate from 2024 to TTM is 48.6%, showing improvement but still in negative territory, suggesting ongoing cash flow constraints.

Breakdown
TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
2.77B	3.02B	3.76B	3.82B	3.04B	-21.34M
	Gross Profit
2.77B	3.02B	2.97B	2.58B	1.92B	-131.55M
	EBIT
0.00	0.00	2.15B	1.80B	930.45M	-1.39B
	EBITDA
0.00	0.00	2.18B	2.06B	1.42B	0.00
	Net Income Common Stockholders
710.67M	931.50M	622.26M	954.52M	772.23M	-1.36B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
0.00	0.00	267.50K	2.15B	10.73B	15.19B
	Total Assets
45.33B	46.05B	39.72B	32.48B	39.74B	33.25B
	Total Debt
32.42B	32.79B	26.96B	21.90B	29.78B	25.73B
	Net Debt
30.93B	31.33B	25.68B	20.57B	28.45B	24.79B
	Total Liabilities
37.19B	38.16B	32.62B	25.47B	30.22B	27.82B
	Stockholders Equity
7.78B	7.79B	7.01B	6.94B	6.60B	5.32B
Cash Flow		Free Cash Flow
420.09M	-2.32B	693.60M	6.87B	2.86B	1.32B
	Operating Cash Flow
550.61M	-2.19B	693.60M	6.87B	2.88B	1.86B
	Investing Cash Flow
320.58M	-2.43B	216.72M	198.25M	2.31B	8.65B
	Financing Cash Flow
-338.61M	4.83B	-842.55M	-6.98B	-4.74B	-10.11B

Rithm Capital Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 11.65
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For RITM, the sentiment is Positive. The current price of 11.65 is above the 20-day moving average (MA) of 11.16, above the 50-day MA of 11.00, and above the 200-day MA of 10.80, indicating a bullish trend. The MACD of 0.24 indicates Negative momentum. The RSI at 65.60 is Neutral, neither overbought nor oversold. The STOCH value of 92.03 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for RITM.

Rithm Capital Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
STWD	71 Outperform	$6.85B	21.31	4.90%	9.47%	-15.62%	-31.74%
RITM	68 Neutral	$6.19B	9.74	9.36%	8.57%	26.78%	-19.34%
ABR	68 Neutral	$1.95B	10.68	7.77%	16.27%	-15.99%	-36.34%
AGNC	67 Neutral	$9.34B	23.45	5.05%	15.69%	-2.35%	-56.25%
BXMT	63 Neutral	$3.34B	―	-2.06%	10.34%	-20.46%	-1436.71%
NLY	62 Neutral	$12.02B	22.58	5.44%	13.34%	2.32%	―
Sector *	60 Neutral	$2.82B	10.29	0.31%	8508.26%	5.91%	-17.42%

Rithm Capital Corporate Events

Rithm Capital Reports Strong Q3 Results Amid Leadership Changes

Rithm Capital Corp. announced strong third-quarter 2024 results, highlighting a GAAP net income of $97 million and earnings available for distribution of $270.3 million. The company maintained a common dividend of $0.25 per share, while also selling 30 million shares for gross proceeds of $340 million. Rithm’s robust performance reflects its strategic focus on operational resilience and value creation for shareholders, showcasing significant growth in its servicing portfolio and origination volume.