Ditech Holding Corporation (NYSE:DHCP), a US$24.37M small-cap, operates in the mortgage and thrifts industry, which is impacted by macroeconomic factors such as interest rate changes and inflation. House price index and the stock market rebound are also indicators of higher consumer and business appetite for credit. Financial services analysts are forecasting for the entire industry, a strong double-digit growth of 29.59% in the upcoming year . Is now the right time to pick up some shares in mortgage and thrift companies? In this article, I’ll take you through the sector growth expectations, and also determine whether Ditech Holding is a laggard or leader relative to its financial sector peers. See our latest analysis for Ditech Holding
What’s the catalyst for Ditech Holding’s sector growth?
NYSE:DHCP Past Future Earnings Apr 26th 18 The mortgage industry is characterized by stable product offerings, consolidation and increasing levels of external competition. In the previous year, the industry saw growth of 2.79%, though still underperforming the wider US stock market. Ditech Holding lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means Ditech Holding may be trading cheaper than its peers.
Is Ditech Holding and the sector relatively cheap?
Mortgage and thrifts companies are typically trading at a PE of 21.26x, in-line with the US stock market PE of 18.18x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. However, the industry returned a lower 5.08% compared to the market’s 10.64%, potentially indicative of past headwinds. Since Ditech Holding’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge Ditech Holding’s value is to assume the stock should be relatively in-line with its industry.
Ditech Holding recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If the stock has been on your watchlist for a while, now may be the time to buy, if you like its ability to deliver growth and are not highly concentrated in the financial industry. However, before you make a decision on the stock, I suggest you look at Ditech Holding’s fundamentals in order to build a holistic investment thesis.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Historical Track Record: What has DHCP’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Ditech Holding? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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