RKT

Rocket is a deeply cyclical, rate-sensitive mortgage and fintech business caught at a trough that is simultaneously remaking itself. FY2025 swung to a net loss of -$68.0M (a -334.5% YoY reversal) and diluted EPS of -$0.05, rendering the trailing P/E (-288.4) meaningless as a valuation anchor. Operating cash flow was deeply negative at -$3.93B, and net income has whipsawed for years ($308M in 2021 → $46.4M → -$16.0M → $29.0M → -$68.0M), confirming this is a feast-or-famine origination cycle rather than a steady compounder. ROE is essentially zero (-0.3%). On the numbers alone, this is not a quality business you buy for fundamentals today.

The balance sheet, however, is not the problem. The ~150% YoY jumps in assets ($60.7B), liabilities ($37.8B) and equity ($22.9B) are not organic — per the MD&A they reflect the June 2025 Up-C Collapse plus the all-stock acquisitions of Redfin (July 1, 2025) and Mr. Cooper (October 1, 2025) landing on the books. Liabilities/equity of 1.65x is conservative for a mortgage bank, and $2.70B of cash gives liquidity cushion. So the loss is a cyclical/transitional loss, not a solvency one. The macro backdrop is also turning the right way: the MD&A notes origination volume grew 15% to $1.9T, the Fed cut 75bps, and the 30-year fixed fell from 6.9% to 6.15% — all tailwinds for both origination and servicing.