Trade-Ideas: Nationstar Mortgage Holdings (NSM) Is Today's Strong On High Relative Volume 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 strong on high relative volume 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 $43.3 million.
  • NSM has traded 103,891 shares today.
  • NSM is trading at 2.20 times the normal volume for the stock at this time of day.
  • NSM is trading at a new high 4.29% above yesterday's close.

'Strong on High Relative Volume' stocks are worth watching because major volume moves tend to indicate underlying activity such as M&A events, material stock news, analyst upgrades, insider buying, buying from 'superinvestors,' or that hedge funds and momentum traders are piling into a stock ahead of a catalyst. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on NSM:

Nationstar Mortgage Holdings Inc. provides residential mortgage loan services in the United States. The company operates in two segments, Servicing and Originations. NSM has a PE ratio of 16.7. Currently there are 3 analysts that rate Nationstar Mortgage Holdings a buy, no analysts rate it a sell, and 5 rate it a hold.

The average volume for Nationstar Mortgage Holdings has been 640,100 shares per day over the past 30 days. Nationstar has a market cap of $2.5 billion and is part of the financial sector and real estate industry. The stock has a beta of 0.53 and a short float of 23.3% with 3.52 days to cover. Shares are down 26.3% year-to-date as of the close of trading on Thursday.

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TheStreet Quant Ratings rates Nationstar Mortgage Holdings as a hold. The company's strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself and disappointing return on equity.

Highlights from the ratings report include:
  • NATIONSTAR MORTGAGE HOLDINGS has improved earnings per share by 34.1% 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 $2.41 versus $2.31 in the prior year. This year, the market expects an improvement in earnings ($3.40 versus $2.41).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Thrifts & Mortgage Finance industry. The net income increased by 35.8% when compared to the same quarter one year prior, rising from $81.89 million to $111.23 million.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 25.6%. Since the same quarter one year prior, revenues fell by 21.3%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • NSM's stock share price has done very poorly compared to where it was a year ago: Despite any rallies, the net result is that it is down by 43.38%, which is also worse that the performance of the S&P 500 Index. Investors have so far failed to pay much attention to the earnings improvements the company has managed to achieve over the last quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Thrifts & Mortgage Finance industry and the overall market on the basis of return on equity, NATIONSTAR MORTGAGE HOLDINGS has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.


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Strong On High Volume: Nationstar Mortgage Holdings (NSM)

Strong On High Volume: Nationstar Mortgage Holdings (NSM)