Dear Reader,
Rocket Companies, the mortgage lending company, and its ultimate parent Quicken Loans made an IPO on the New York Stock Exchange.
Currently the public market values Rocket Companies at around 38 billion USD.
According to Yahoo Finance Rocket Companies brought in 4.244 billion USD and made 894 million USD in profit in 2019, which roughly bring its current Price/Earnings and Price/Sales ratios to roughly 41 and 9 respectively.
In its core, Rocket Companies is a mortgage lender that benefited after 2008 as traditional banks pulled out partially of mortgage lending due to falling house market prices. Recently, Rocket Companies benefited handsomely from the Federal Reserve slashing interest rates to help the economy weather the coronavirus pandemic. Rocket Companies tries to present itself as a financial technology company and the market values in this way, it seems.
I think Rocket Companies is grossly overvalued at 38 billion USD market capitalization. Rocket Companies' intrinsic values is around 25 billion USD, in my opinion. Large banks with significant mortgage businesses like Wells Fargo, JPMorgan, Bank of America and Citigroup trade at much lower valuation metrics.
Rocket Companies is the largest mortgage lender in America with a market share of 9.2 % of the mortgage market, it claims.
That said, Rocket Companies still seems grossly overvalued. What is more, if the coronavirus pandemic causes a house market price crash, Rocket Companies market capitalization could well fall to around 10 billion USD.
Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".
Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.
Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!
Respectfully yours,
Petar Posledovich
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