The firm said it sees little downside risk to the stock and says underlying trends in mortgages should improve going forward.
TheStreet Ratings team rates PHH CORP as a Sell with a ratings score of D+. TheStreet Ratings Team has this to say about their recommendation:
"We rate PHH CORP (PHH) a SELL. This is driven by multiple weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its unimpressive growth in net income, generally high debt management risk, weak operating cash flow and feeble growth in its earnings per share."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Diversified Financial Services industry. The net income has significantly decreased by 180.8% when compared to the same quarter one year ago, falling from $52.00 million to -$42.00 million.
- The debt-to-equity ratio is very high at 3.29 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- Net operating cash flow has decreased to $471.00 million or 43.45% when compared to the same quarter last year. In addition, when comparing the cash generation rate to the industry average, the firm's growth is significantly lower.
- PHH CORP has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, PHH CORP increased its bottom line by earning $1.96 versus $0.45 in the prior year. For the next year, the market is expecting a contraction of 106.6% in earnings (-$0.13 versus $1.96).
- In its most recent trading session, PHH has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, we do not believe this stock offers ample reward opportunity to compensate for the risks, despite the fact that it rose over the past year.
- You can view the full analysis from the report here: PHH Ratings Report