PennyMac Mortgage (PMT) AI Stock Analysis

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PennyMac Mortgage

(NYSE:PMT)

68Neutral

PennyMac Mortgage's overall score reflects strong technical momentum and positive earnings call insights. The stock benefits from being undervalued with an attractive dividend yield. However, financial volatility and operational challenges remain areas of concern, requiring ongoing strategic focus.

Positive Factors

Earnings

The stock rallied on good earnings results.

Financial Performance

PennyMac Mortgage (PMT) reported 3Q GAAP EPS of $0.36, ahead of BofA/Cons estimates.

Negative Factors

Dividend Yield

The dividend yield at 12% remains lower than in the other REIT-servicers Annaly and Two Harbors.

Origination Volume

Origination volume declined sequentially to $3.5 billion of correspondent loans acquired for PMT.

PennyMac Mortgage (PMT) vs. S&P 500 (SPY)

Market Cap

$1.19B

Dividend Yield11.7%

Average Volume (3M)798.20K

Price to Earnings (P/E)10.0

Beta (1Y)0.82

Revenue Growth-16.66%

EPS Growth-23.98%

CountryUS

Employees7

SectorReal Estate

Sector Strength79

IndustryREIT - Mortgage

Share Statistics

EPS (TTM)1.33

Shares Outstanding86,860,960

10 Day Avg. Volume841,686

30 Day Avg. Volume798,199

Financial Highlights & Ratios

PEG Ratio0.59

Price to Book (P/B)N/A

Price to Sales (P/S)1.97

Price to Cash Flow (P/CF)-0.20

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$14.30

Price Target Upside4.61% Upside

Rating ConsensusHold

Number of Analyst Covering6

PennyMac Mortgage Business Overview & Revenue Model

Company DescriptionPennyMac Mortgage Investment Trust (PMT) is a specialty finance company primarily operating within the real estate sector. It focuses on investing in mortgage-related assets and managing residential mortgage loans. The company offers a range of services including mortgage loan origination and servicing, and it operates through two main segments: correspondent production and credit sensitive strategies. PMT primarily invests in credit risk transfer (CRT) securities, mortgage servicing rights (MSRs), and other mortgage-related opportunities to generate income for its shareholders.

How the Company Makes MoneyPennyMac Mortgage Investment Trust makes money through several key revenue streams. The primary sources of revenue include the net interest income earned from its investment in mortgage-related assets and the income generated from its mortgage origination and servicing operations. In its correspondent production segment, PMT purchases newly originated mortgage loans from correspondent lenders, pools them, and sells them to government-sponsored enterprises (GSEs) or into the secondary market, earning gains on the sale. In the credit sensitive strategies segment, the company invests in CRT securities and MSRs, which provide a steady stream of income through interest payments and servicing fees. Additionally, PennyMac benefits from strategic partnerships with financial institutions and investors, which support its operations and growth in the mortgage market.

PennyMac Mortgage Financial Statement Overview

Summary

PennyMac Mortgage's financials show volatility in revenue and income due to operational challenges, reflected in a 45 score for the income statement. The balance sheet's high debt-to-equity ratio and inconsistent ROE result in a score of 55, while cash flow challenges yield a score of 60. Overall, the company is in transition, needing to stabilize revenue and manage debt for long-term health.

Income Statement

Neutral

PennyMac Mortgage shows significant fluctuations in revenue and profit margins. While the gross profit margin demonstrates some recovery in recent periods, the net profit margin remains volatile due to inconsistent net income figures. The revenue growth rate has been erratic, indicating challenges in maintaining consistent revenue streams. The negative EBIT and EBITDA margins in the latest period highlight operational inefficiencies.

Balance Sheet

Neutral

The balance sheet reveals a high debt-to-equity ratio, which could pose financial risks if not managed effectively. However, the equity ratio suggests that a reasonable proportion of the company's assets are financed by equity. The return on equity is inconsistent, driven by fluctuating net income figures. Despite these challenges, the company maintains substantial cash and equivalents.

Cash Flow

Neutral

PennyMac Mortgage's cash flow statements indicate challenges in maintaining stable free cash flow, although there has been some improvement in operating cash flow over time. The free cash flow to net income ratio is relatively strong, suggesting efficient cash generation relative to reported net income. However, fluctuations in cash flow from investing and financing activities point to ongoing adjustments in capital structure.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
14.72M	725.87M	103.11M	82.84M	108.63M
	Gross Profit
1.94M	578.77M	25.55M	-107.23M	-119.97M
	EBIT
-3.67M	558.23M	47.89M	44.66M	79.73M
	EBITDA
-3.67M	1.28B	54.64M	44.66M	79.73M
	Net Income Common Stockholders
119.17M	199.65M	-73.29M	56.85M	52.37M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
337.69M	409.42M	364.14M	1.93B	2.98B
	Total Assets
14.41B	13.11B	13.92B	13.77B	11.52B
	Total Debt
3.54B	4.85B	4.77B	4.49B	2.27B
	Net Debt
3.20B	10.19B	3.33B	2.73B	-583.60M
	Total Liabilities
12.47B	11.16B	11.96B	11.41B	9.22B
	Stockholders Equity
1.94B	1.96B	1.96B	2.37B	2.30B
Cash Flow		Free Cash Flow
158.10M	1.33B	1.78B	-2.79B	671.66M
	Operating Cash Flow
158.10M	1.34B	1.78B	-2.82B	671.66M
	Investing Cash Flow
603.00K	-21.73M	-1.87B	1.09B	-15.37M
	Financing Cash Flow
-157.86M	-1.15B	135.89M	1.73B	-702.64M

PennyMac Mortgage Technical Analysis

Technical Analysis Sentiment

Negative

Last Price13.67

Price Trends

50DMA

14.09

Negative

100DMA

13.43

Positive

200DMA

13.27

Positive

Market Momentum

MACD

0.18

Positive

RSI

56.39

Neutral

STOCH

39.51

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For PMT, the sentiment is Negative. The current price of 13.67 is below the 20-day moving average (MA) of 14.54, below the 50-day MA of 14.09, and above the 200-day MA of 13.27, indicating a neutral trend. The MACD of 0.18 indicates Positive momentum. The RSI at 56.39 is Neutral, neither overbought nor oversold. The STOCH value of 39.51 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for PMT.

PennyMac Mortgage Risk Analysis

PennyMac Mortgage disclosed 76 risk factors in its most recent earnings report. PennyMac Mortgage 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 Mortgage Peers Comparison

Overall Rating

UnderperformOutperform

Sector (61)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
AGNC	69 Neutral	$8.22B	9.66	9.58%	16.04%	384.69%	963700.00%
PMT	68 Neutral	$1.19B	9.99	8.24%	11.70%	-16.66%	-23.98%
NLY	68 Neutral	$11.25B	11.62	8.40%	14.07%	13.33%	―
CIM	63 Neutral	$950.03M	10.68	6.92%	12.44%	7.13%	64.82%
TWO	62 Neutral	$1.20B	4.87	13.74%	15.60%	28.33%	―
Sector *	61 Neutral	$4.43B	16.13	-3.23%	11.37%	6.25%	-21.19%
MFA	60 Neutral	$982.18M	11.72	6.35%	14.72%	26.34%	79.07%

* Real Estate Sector Average

Performance Comparison

PMT

PennyMac Mortgage

13.67

0.73

5.64%

AGNC

AGNC Investment

8.98

0.61

7.29%

NLY

Annaly Capital

18.83

1.96

11.62%

CIM

Chimera Investment

11.74

0.11

0.95%

MFA

MFA Financial

9.58

-0.17

-1.74%

TWO

Two Harbors

11.54

0.75

6.95%

PennyMac Mortgage Earnings Call Summary

Earnings Call Date: Jan 30, 2025 | % Change Since: 6.05% | Next Earnings Date: May 1, 2025

Earnings Call Sentiment Positive

The earnings call presents a generally positive outlook for PMT, emphasizing strong fourth quarter performance, consistent dividends, and successful securitization efforts despite challenges in loan acquisition and losses on certain investments.

Highlights

Strong Fourth Quarter Performance

PMT produced a 10% return on equity in Q4, with $36 million net income to common shareholders and $0.41 diluted earnings per share. Book value per share increased to $15.87.

Dividend Consistency

PMT declared a fourth quarter common dividend of $0.40 per share, maintaining consistency despite interest rate volatility.

Successful Securitization Efforts

Completed two securitizations of agency-eligible investor loans in Q4, and a third after quarter-end, retaining $73 million of new investments in credit subordinate bonds.

Low Delinquency Rates

Delinquency rates for borrowers underlying PMT's MSR portfolio remained low, supporting asset performance.

Strategic Repositioning

Repositioned balance sheet for higher interest rate environment, with the issuance of $1.3 billion in term debt and opportunistic sale of certain investments.

Lowlights

Challenges in Correspondent Loan Acquisition

Total correspondent loan acquisition volume was $28 billion in Q4, up 9%, but correspondent loans acquired for PMT’s account totaled $3.5 billion, down 41% from the prior quarter.

Losses on Non-Agency Subordinate MBS

Faced losses on non-agency subordinate MBS due to increasing interest rates, impacting the credit-sensitive strategies.

Decreased Retention of Conventional Correspondent Production

PMT retained 19% of total conventional correspondent production in Q4, down from 42% in the third quarter.

Company Guidance

During the fourth quarter and full year 2024 earnings call for PennyMac Mortgage Investment Trust (PMT), the company reported a strong financial performance, highlighted by a 10% return on equity in the fourth quarter. PMT achieved a net income of $36 million for common shareholders, translating to diluted earnings per share of $0.41, and declared a dividend of $0.40 per share. The book value per share increased to $15.87 by year-end. For the full year, PMT realized a return on common equity of 8% with $119 million in net income attributable to common shareholders. The company successfully navigated significant interest rate volatility, with the 10-year Treasury yield ranging from 3.6% to 4.7%, by actively hedging mortgage servicing rights. PMT's strategic initiatives included the opportunistic sale of certain investments, a major rebalance of its Agency MBS portfolio, and the issuance of $1.3 billion in term debt. The firm also renewed its mortgage banking agreement with PFSI. Looking forward, PMT anticipates robust investment opportunities in private label securitizations, particularly for investor loans, with return on equity for these investments expected to be in the low to mid-teens.

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.