NEW YORK (TheStreet) -- Nationstar Mortgage Holdings (NSM shares are down -1.6% to $4 on Wednesday after being downgraded to "underperform" from "market perform" by analysts at Wells Fargo (WFC - Get Report), who lowered their rating for the entire mortgage services sector to "underweight" from "market weight."
TheStreet Ratings team rates NATIONSTAR MORTGAGE HOLDINGS as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:
"We rate NATIONSTAR MORTGAGE HOLDINGS (NSM) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income and a generally disappointing performance in the stock itself."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 0.1%. Since the same quarter one year prior, revenues rose by 11.5%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- Net operating cash flow has significantly increased by 265.82% to $617.26 million when compared to the same quarter last year. In addition, NATIONSTAR MORTGAGE HOLDINGS has also vastly surpassed the industry average cash flow growth rate of -39.73%.
- NATIONSTAR MORTGAGE HOLDINGS 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. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, NATIONSTAR MORTGAGE HOLDINGS increased its bottom line by earning $2.41 versus $2.31 in the prior year. This year, the market expects an improvement in earnings ($3.65 versus $2.41).
- The share price of NATIONSTAR MORTGAGE HOLDINGS has not done very well: it is down 15.40% and has underperformed the S&P 500, in part reflecting the company's sharply declining earnings per share when compared to the year-earlier quarter. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
- 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 Thrifts & Mortgage Finance industry. The net income has significantly decreased by 61.6% when compared to the same quarter one year ago, falling from $62.62 million to $24.04 million.
- You can view the full analysis from the report here: NSM Ratings Report