Nationstar Mortgage Holdings (NSM) Is Today's Dead Cat Bounce Stock

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified Nationstar Mortgage Holdings ( NSM) as a "dead cat bounce" (down big yesterday but up big today) candidate. In addition to specific proprietary factors, Trade-Ideas identified Nationstar Mortgage Holdings as such a stock due to the following factors:

  • NSM has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $85.6 million.
  • NSM has traded 1.7 million shares today.
  • NSM is up 3.2% today.
  • NSM was down 10.5% yesterday.

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More details on NSM:

Nationstar Mortgage Holdings Inc. operates as a residential mortgage loan servicer in the United States. It operates in two segments, Servicing and Originations. NSM has a PE ratio of 11.9. Currently there are 5 analysts that rate Nationstar Mortgage Holdings a buy, no analysts rate it a sell, and 2 rate it a hold.

The average volume for Nationstar Mortgage Holdings has been 903,400 shares per day over the past 30 days. Nationstar has a market cap of $3.7 billion and is part of the financial sector and real estate industry. The stock has a beta of -0.78 and a short float of 35.9% with 3.28 days to cover. Shares are up 31.5% year to date as of the close of trading on Friday.

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates Nationstar Mortgage Holdings as a sell. The area that we feel has been the company's primary weakness has been its unimpressive growth in net income.

Highlights from the ratings report include:
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Thrifts & Mortgage Finance industry average, but is greater than that of the S&P 500. The net income increased by 48.7% when compared to the same quarter one year prior, rising from $55.07 million to $81.89 million.
  • 43.10% is the gross profit margin for NATIONSTAR MORTGAGE HOLDINGS which we consider to be strong. Regardless of NSM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NSM's net profit margin of 11.76% is significantly lower than the industry average.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the Thrifts & Mortgage Finance industry and the overall market, NATIONSTAR MORTGAGE HOLDINGS's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • This stock has increased by 49.98% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the future course of this stock, we feel that the risks involved in investing in NSM do not compensate for any future upside potential, despite the fact that it has seen nice gains over the past 12 months.
  • NATIONSTAR MORTGAGE HOLDINGS has improved earnings per share by 49.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, NATIONSTAR MORTGAGE HOLDINGS increased its bottom line by earning $2.31 versus $0.24 in the prior year. This year, the market expects an improvement in earnings ($4.70 versus $2.31).

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12-months. Learn more.

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