As of 10 Aug 2020

Baseball Stats

Founded:1985

Employees: 20k

Share price: $21

MarketCap: $40B

HQ - Detroit

Company description

Rocket is end to end digital mortgage platform that originates, sells MBS to investors, and services the loans.

1. Origination - Faster, cheaper and higher quality borrower targeting vs others (Refi heavy) → Core biz (80% rev)
2. Servicing - Client retention rates and delinquency trends are better than industry average (total servicing portfolio of $378b with 1.9M borrowers, started this biz in 2010)
3. Title & Settlement services (insurance agent only)

Why we are at peak today?

1. Mostly refinance business (70% vs market at 55% in 1H 2020) which increased due to int rates went to 50bps on 10yr treasury
2. Gain on sale margins became too high (~5%) given spread b/w 30yr mortgage and 10yr treasury widened (from x% in '18 end, to y in '19, to z today) vs in normal times its 3.5%
3. Significant marketing spend ($900M in 2019) to build brand

Not valued at rich multiples due to cyclical business and no visibility

1. Biggest debate is valuing it at fintech biz vs fin only, I think the industry leans towards 'fin' only
2. Priced at 8x forward earnings given cyclical industry (mortgage co's historically traded at lower multiples given their lack of biz visibility and int rate exposure)

Market / Competition

• Market size
• Market share/Competition

Detailed notes

• Key Business segments
• Costs
• Customer love
• Origination share shifted to 3rd party in last two years

Financials

Overall per loan parameters (2019)

• Co recognizes gain on sale of mortgage at rate lock vs many others do it at funding
• Rocket's GOS (gain on sale) has been >4% even in prior years (much higher than banks as there is no sharing with the broker/originator)

Total origination

Total servicing book