Rocket Companies (RKT): Valuation in Focus as Housing Data and Mortgage Rates Shift Investor Expectations

If you have been watching Rocket Companies (RKT), the past month has been anything but dull. With several new reports out of Redfin, which Rocket owns, the U.S. housing market is showing signs of life in some areas and cooling in others. The first month-over-month increase in home price growth since January, juxtaposed with slower annual gains and a slip in pending sales, signals shifting momentum, especially as mortgage rates hit an 11-month low. For any investor, these types of shifting signals can nudge you to reassess just how exposed Rocket is to swings in housing and whether that is a risk worth taking.

This flurry of housing data and rate movements has not gone unnoticed in Rocket’s stock performance. Over the past three months, shares are up an impressive 37%, and for the year to date, they have climbed nearly 80%. While momentum has been building quickly, the stock’s longer-term returns are more modest, and investors continue to weigh whether ongoing uncertainties could cap further upside. Recent media and market attention has certainly put Rocket in the spotlight, but as we have seen before, lofty gains can invite volatility.

With so much housing data and stock movement in play, the question now is whether Rocket’s recent run represents real value or if the market is already looking ahead to faster future growth. Would you be getting in early, or are you late to the party?

Most Popular Narrative: 12% Overvalued

The prevailing narrative suggests Rocket Companies is trading well above fair value, with analyst consensus seeing the stock as 12% overvalued based on forecasts for future growth and profitability.

The integration of Redfin and the planned acquisition of Mr. Cooper are expanding Rocket's customer reach and local agent network. This is unlocking new cross-sell and purchase opportunities, potentially driving higher revenues and customer lifetime value in the long term.

Curious about what is fueling this bold valuation call? The narrative rests on a collision of fast-improving revenues and margins, tech-driven cost efficiencies, and ambitious growth scenarios that reshuffle old market expectations. Want a peek into the math behind those optimistic projections? Uncover which strategic levers and crucial financial assumptions make or break this valuation case.

Result: Fair Value of $17.42 (OVERVALUED)

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

However, if Rocket’s integrations outperform and its technology drives lasting cost reductions, these catalysts could quickly change the current overvaluation narrative.

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

Another View: What Does Our DCF Say?

Our SWS DCF model tells a different story, suggesting Rocket is trading well above what its future cash flows might support. This challenges the market optimism. Could the fundamentals point in another direction?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Rocket Companies for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Rocket Companies Narrative

If the consensus view does not fit your outlook or you are the type to dig beneath the surface, you can build your own 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 1 important warning sign 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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