Rocket Companies (RKT): Assessing Valuation After Recent Share Price Momentum

Rocket Companies (RKT) shares ended the latest session up about 2% to close at $17.61. That move follows recent trading momentum, with the stock gaining 6% over the past week but still off about 10% over the past month.

See our latest analysis for Rocket Companies.

Rocket Companies’ share price momentum appears to be picking up steam, reversing last month’s slide with a strong 6% weekly gain and a year-to-date share price return of over 62%. Total shareholder returns have also remained impressive over the past one and three years, suggesting persistent optimism among investors as the company navigates recent market fluctuations.

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With impressive recent returns and a renewed surge in momentum, the key question for investors is whether Rocket Companies remains undervalued or if the current share price already reflects all the expected future growth.

Most Popular Narrative: 4.8% Undervalued

Rocket Companies’ most widely followed narrative values the stock at $18.50 per share, just above the latest close of $17.61. This modest gap reflects increased optimism among analysts, anchored in improved long-term profit and revenue forecasts.

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. Such factors may dampen anticipated growth in customer lifetime value and overall revenues.

Read the complete narrative.

What’s really fueling this re-rating? One pillar of this valuation is a sharp turnaround in profit margins and strong top-line growth over the next few years. Want to know which forecasts set this price target apart? Click through to reveal the bold assumptions nudging Rocket’s fair value above the current share price.

Result: Fair Value of $18.50 (UNDERVALUED)

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

However, persistent housing affordability issues or unexpected setbacks in integrating recent acquisitions could quickly dampen Rocket’s upbeat outlook and valuation case.

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

Another View: High Growth, But Expensive by Peer Comparison

While Rocket Companies appears undervalued based on ambitious growth forecasts, a look at its price-to-sales ratio provides a different perspective. The company trades at 9.6 times sales, significantly above both the industry average of 2.5 and the peer average of 2.4. Even when compared to its own fair ratio of 10.4, the stock’s current pricing seems steep, indicating a valuation risk that could give investors reason to pause. If the market narrows this gap, how will the story change?

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

Build Your Own Rocket Companies Narrative

Feel free to challenge these assumptions or dig into the numbers yourself, as you can craft a personalized narrative 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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