A Fresh Look at Rocket Companies (RKT) Valuation After Recent Share Price Momentum

Rocket Companies (RKT) shares edged lower, dipping just under 1% today. The stock has gained around 6% over the past week and is up 57% year to date, which has sparked discussion on recent momentum among investors.

See our latest analysis for Rocket Companies.

Rocket Companies’ share price has surged in 2024 and is currently trading at $17.05, with year-to-date gains reflecting building momentum among investors. While the 1-year total shareholder return sits at 32.5%, the notable three-year total return of 140% points to strong long-term performance and improving sentiment around the stock.

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With shares climbing and expectations high, the key question for investors is whether Rocket Companies is trading at a bargain given its recent growth, or if the market has already priced in all of its future potential.

Most Popular Narrative: 8.7% Undervalued

With Rocket Companies last closing at $17.05, the most widely followed narrative estimates a fair value of $18.67. This suggests potential upside that stands apart from recent price action and sets the stage for further debate about the company’s future outlook.

The market may be ascribing premium value to Rocket's data ecosystem and cross-sell capabilities from the expanded "FinTech ecosystem." However, this could prove overly optimistic if younger demographic cohorts delay home-buying due to persistent affordability problems, which could dampen anticipated growth in customer lifetime value and overall revenues.

Read the complete narrative.

Want to know the bold narrative fueling this premium? The heart of the valuation lies in aggressive assumptions about future earnings and margin expansion that differ from conventional patterns. Interested in the specifics that cast Rocket’s future trajectory in a new light? The full narrative details the surprising figures behind its fair value target.

Result: Fair Value of $18.67 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, early cost synergies from acquisitions or stronger homebuyer demand could quickly shift sentiment and challenge the more cautious view on Rocket's outlook.

Find out about the key risks to this Rocket Companies narrative.

Another View: Share Price Looks Expensive by Sales Ratio

While the fair value narrative points to undervaluation, looking at the company's price-to-sales ratio reveals a different picture. Rocket Companies trades at 7.9 times sales, much higher than the industry average of 2.4 times and also above its peer average of 2.2 times. Even though its 7.9x is below the current fair ratio of 9.3x, the premium to the broader market suggests investors expect much more growth. This higher multiple raises the question of whether investors could be overconfident in future profits.

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Rocket Companies Narrative

If you think there’s another angle or want to see how the numbers stack up for yourself, you can craft your own perspective in just a few minutes. Do it your way

A great starting point for your Rocket Companies research is our analysis highlighting 1 key reward and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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