Rocket Companies, Inc. (RKT): what the price assumes

Generated: 2026-08-06 · Exported: 2026-08-07 · Source: https://boothcheck.com/report/RKT

Headline

Field	Value
Ticker	RKT
Company	Rocket Companies, Inc.
Sector / Industry	Financial Services
Current price	$13.86/sh
Composition	Direct to Consumer 88% / Partner Network 12%

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Field	Value
Inversion basis	whole-company
Must persist for	19.6y
Multiple paid	115x operating income

Solve inputs: computed at a 10.6% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~2.7 years.

Reconcile: at the x-ray's 9.3% required return this reads ~16 years; the models below use their own rates.

How unusual the bet is: elevated (limited comparison data)

Reference	Value
sustained it ~10 years at this level	14%
implied end-window share	0%

Valuation X-Ray

Every valuation family lands below the price. The price therefore sits beyond what those standard frames encode.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Family	Median price/FV	Models	Reads
Asset	9.03x	2	expensive
Earnings	9.83x	1	expensive
Relative	—	0	—
Growth	—	0	—

Families that call it expensive: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 7.8%); the inversion above states its own rate.

Per-Model Detail (n=3)

Model	Family	FV	Price/FV	Applicable	Methodology
DCF Perpetual Growth	Growth	—	—	no	Negative/zero FCF — equity value floored at $0
DCF Exit Multiple	Growth	—	—	no	Negative/zero FCF or EBITDA — equity value floored at $0
Relative Valuation	Relative	—	—	no	P/E 39.6x (blended: static sector reference 18x + trailing (TTM) 165x), scenarios: 31.7x / 39.6x / 47.5x (bear / base = reference held flat / bull), EV/EBITDA 26.4x
Simple DDM	Growth	—	—	no	—
Two-Stage DDM	Growth	—	—	no	—
Simple Excess Return	Asset	$0.91	15.23x	yes	BV/sh $8.16, ROE (TTM) 1.0%, ke 9.3%
Two-Stage Excess Return	Asset	$0.48	28.86x	yes	5yr excess ROE then converge to ke=9.3% (excluded from median)
Discounted Future Market Cap	Growth	—	—	no	Rev $8.6B, growth 30% (input: historical growth; tapered), Terminal P/S: 3.7x / 4.6x / 5.5x (bear / base = today's held flat / bull, cap 12x)
Peter Lynch Fair Value	Relative	—	—	no	EPS $0.13, growth 7% (input: historical EPS growth), PEG=22.62 (Overvalued)
Margin Trajectory	Growth	—	—	no	—
Earnings Power Value	Earnings	—	—	no	—
Residual Income	Asset	$0.34	40.75x	yes	BV $8.16 + 5yr PV of (ROE (TTM) 1.0% − Kₑ 9.3%) × BV; BV grows 0.7%/yr (excluded from median)
Graham Number	Asset	$4.89	2.83x	yes	√(22.5 × EPS $0.13 × BVPS $8.16) — Graham's conservative floor
EV/EBITDA Relative	Relative	—	—	no	EBITDA $0.41B × sector EV/EBITDA 12.0x
FCF Yield	Earnings	—	—	no	—
SBC-Adj FCF Yield	Earnings	—	—	no	—
Ben Graham Formula	Earnings	—	—	no	EPS $0.13 × (8.5 + 2×7.3%) × (4.4 / 5.3%)
ROIC-Justified P/B	Asset	—	—	no	—
P/Sales Sector	Relative	—	—	no	Revenue $8.60B × sector P/S 2.5x
PEG Fair Value	Relative	—	—	no	EPS $0.13 × (PEG 1.5 × growth 7.3% (input: historical EPS growth)) → PE 10.9x
Earnings Yield	Earnings	$1.41	9.83x	yes	EPS $0.13 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations Multiple	Relative	—	—	no	—
Clinical Phase NPV	Growth	—	—	no	—
Merton	Asset	—	—	no	—
V5 Mechanical	—	—	—	no	—

Economic-Unit Decomposition (Sum Of The Parts)

The issuer is a funded financial business. Debt, interest, and cash flows are operating inputs, so industrial EV, net-debt, WACC, and free-cash-flow lenses do not apply; value the common-equity claim with book, earnings, capital, and payout economics.

Unit	Role	Valuation basis	Revenue	Reported profit	Value evidence	Status
Direct to Consumer	financial	equity	$4.8b	—	withheld	unresolved standalone equity facts required
Partner Network	financial	equity	$668.0m	—	withheld	unresolved standalone equity facts required

No unit-level total common-equity value is stated. Each financial unit requires supported standalone common equity, normalized earnings, capital adequacy, and payout capacity. Consolidated debt, interest, and cash are operating balances, not an enterprise-to-equity bridge; company-level book, earnings, capital, and payout lenses remain the coherent cross-checks.

Solvency

Field	Value
Net debt	$7.7b
Net debt / NOPAT (after-tax)	25.50x
Net debt / operating income (pre-tax)	18.93x
Share count CAGR (dilution)	9.6%
Burning cash	yes

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

• Rocket is no longer mainly a lender that sells what it makes; it now administers a servicing book large enough that fee income rose by 682 million dollars in the first quarter of 2026 against the same quarter a year earlier, purely because the average portfolio got bigger.
• The two deals that built that book were paid for substantially in stock, and the share count has compounded at roughly 9.6% a year since early 2022, so each holder owns a thinner slice of a much larger company.
• The near-term tell is whether the acquired servicing relationships stay put: the company's own purchase accounting rests on an assumed attrition rate for the inherited subservicing partners.

Bull Case

One number decides how this company reads, and it is not the origination volume everyone quotes. It is the size of the loan book Rocket gets paid to administer. A servicer collects a small annual fee on every mortgage it handles, and that fee arrives on schedule whether borrowers are refinancing in a frenzy or sitting still. In the first quarter of 2026 that stream contributed 682 million dollars more than it had a year earlier, on nothing more exotic than a larger average portfolio. Rocket did not assemble that book one loan at a time. It bought it.

What makes the servicing book more than a fee annuity is how it behaves when rates move. The 10-K is direct about the mechanism: changes in the fair value of MSRs are primarily driven by interest rate changes, which impact the likelihood of loan prepayments and refinancing. In periods of rising interest rates, the fair value of the MSRs generally increases as prepayments decrease. Read that alongside the origination business and the shape becomes clear. High rates freeze refinancing and starve the lending side, and that is exactly when the servicing asset appreciates. Low rates do the reverse: the servicing asset marks down as borrowers prepay, and the lending machine that once made those loans is the natural place they refinance. The two halves lean opposite ways.

The lending half is currently the one working. Direct to Consumer gain on sale of loans, net came in at 1,162 million dollars for the first quarter of 2026 against 660 million in the same quarter of 2025. The combined figure for net gain on sale, the unrealized change in the pipeline and the pipeline hedges reached 694 million dollars, up 183 million or 36% on the year, which the company attributes to higher net rate lock volume. That is a demand recovery showing up in the line where it should show up first.

The wholesale side gets less attention and costs less to run. Rocket describes it plainly: Rocket Pro works exclusively with mortgage brokers, community banks and credit unions, enabling them to maintain their own brand and client relationships while leveraging Rocket Mortgage's expertise, technology and award-winning process. A broker channel is a distribution network the company does not have to staff, and a bank that hands off a mortgage keeps its depositor. Rocket keeps the loan.

None of this makes the shares cheap, and the bull should not pretend otherwise. Every standard valuation family lands under today's quote, and the stock issued to buy the servicing book is a permanent claim on whatever it earns. The bull argument is narrower and more specific than a value argument: Rocket has assembled the largest pool of mortgage borrowers it will ever have direct contact with, and the whole bet is that owning the relationship is worth more than owning the loan.

Bear Case

A mortgage originator does not lend its own money. It borrows short against the loans it has just made, sells them within weeks, and lives on the spread and the fees. That structure is fine while the funding is cheap and the loans move. It is unforgiving when either stops. Rocket's own quarter shows the first half of that sentence getting more expensive: Interest expense was $349 million, an increase of $240 million, compared to $109 million in 2025, driven by the senior notes issued and assumed in 2025, as well as increased utilization of mortgage loan funding facilities associated with higher origination volume. Part of that is simply a bigger company. Part of it is a company that inherited borrowings along with the servicing book.

The asset on the other side of those borrowings is not a hard one. Servicing rights are carried at a value the company models rather than observes, and the 10-K says so: The value of our MSRs is based on the cash flows projected to result from the servicing of the related mortgage loans and continually fluctuates due to a number of factors. The inputs include prepayment speeds, the cost to service each loan, and delinquency assumptions. When rates fall far enough to restart refinancing, that carrying value compresses, and it compresses on the balance sheet before the refinancing revenue arrives to replace it. The hedge the bull case describes works in both directions.

Set that against what the shares require. No family of valuation method reaches today's quote. Asset-based approaches, which for a lender built on book equity are the least speculative lens available, land far under it, and the earnings-power approaches land under it too. The quote embeds company-wide growth running at its self-funding ceiling of roughly 25% a year and holding there for close to two decades. Among comparable fast growers, only about 14% held that kind of pace even for a decade. The comparison set behind that read is thin, which makes it a weaker claim rather than a gentler one.

Then there is who pays for the growth. The servicing book arrived through acquisitions settled substantially in stock, and the share count has compounded at roughly 9.6% a year since early 2022. Existing holders funded the expansion by accepting a smaller share of it. That is a legitimate way to grow, but it changes the arithmetic: per-share economics have to improve faster than the count rises before anyone is better off.

Competition does not make that easier. PFSI converted close to 23 cents of every trailing revenue dollar into profit, and RITM about 14 cents on trailing revenue of 5.2 billion dollars. UWMC, growing trailing revenue about 28% year over year, converted under 2 cents. The channel Rocket is expanding into is the one where returns are thinnest, and the wholesale competitors already there have spent years building the broker relationships Rocket now wants. Rocket's own risk disclosure names the pressure without softening it: that we match competitors' lower pricing, we may experience lower gain on sale margins.

Valuation

Rocket sells mortgages and collects fees for administering them. Both halves of that business are cyclical, and the company has spent the last several quarters making itself much larger in the second half. Any read of the shares has to start by acknowledging that the entity trading today is not the one whose multi-year record you would like to consult.

The valuation methods are unusually united here. Asset-value approaches and earnings-power approaches both land well below where the shares trade, and the growth and peer-multiple approaches produce nothing usable at all, because the trailing cash generation they need is not there in the form they need it. Every family that returns an answer returns one under the quote. That is not a mild disagreement about the right multiple. It means the shares are supported by something none of the standard frames encode.

What that something is, stated plainly: the quote assumes company-wide operating growth runs at its self-funding ceiling, roughly 25% a year, and stays there for close to two decades. Each percentage point of growth given back moves that horizon by about 2.7 years, so the assumption is not delicately balanced, it is simply long. The historical reference is unflattering: only about 14% of comparable fast growers sustained that pace for even a decade. Two of the four available comparison checks returned usable data, so treat this as a direction rather than a measurement.

The peer set sharpens the question of what the market is actually paying for. PFSI turned roughly 23 cents of each trailing revenue dollar into profit; RITM roughly 14 cents; UWMC under 2 cents while growing trailing revenue about 28% year over year. Mortgage companies convert revenue to profit across an enormous range depending on how much servicing they own and how they mark it, which is precisely why the servicing book Rocket just bought matters more than the origination headline.

Book value stood near 8.16 dollars a share, and total equity reached 23.2 billion dollars as of March 31, 2026, against 8.9 billion at September 30, 2025. Almost the entire increase arrived with an acquisition rather than being earned. That equity base is real, and for a lender it is the buffer that absorbs credit and mark-to-model losses. It is also the denominator that now has to produce a return, and the trailing year has barely begun to. That gap, not the multiple, is why the asset-value approaches land as far under the quote as they do.

For a funded lender, the usual leverage arithmetic does not apply. Borrowings here are raw material, not capital structure, and the warehouse facilities that finance loans in transit sit alongside corporate borrowings in the same total. The relevant question is narrower and it is a funding question: whether those facilities stay open and reasonably priced through a rate cycle that has already tripled the interest line year over year.

Catalysts

The reporting entity changed twice inside a year. Rocket completed its acquisition of Redfin on July 1, 2025 for a total purchase price of approximately 1.7 billion dollars. The servicing acquisition that followed brought with it 1,438 million dollars of identifiable intangible assets, of which 1,175 million was customer relationships. The practical consequence for anyone reading a chart is that year-over-year comparisons through the middle of 2026 are comparisons between two different companies.

The first quarter of 2026, filed on May 12, 2026, is the first period showing the combined business for a full quarter. Revenue net of interest expense reached 2,941 million dollars against 1,101 million in the first quarter of 2025. The quarter was profitable before tax after a loss in the comparable quarter a year earlier. Servicing fee income supplied the largest single piece of the improvement, and the change in fair value of servicing rights partially offset it, down 36 million dollars on the prior year.

Two filed items are worth tracking rather than reacting to. The purchase accounting for the acquired subservicing partner relationships rests on an assumed attrition rate alongside forecasted revenue growth and margin assumptions, so the intangible carrying value is itself a forecast that later periods will test. Separately, Rocket inherited litigation from the acquisition: a putative class action brought on behalf of persons affected by a cyber attack on the acquired servicer dated October 31, 2023, which the company states it is vigorously defending.

Peer Cohorts (Per Segment, With Filing Citations)

Direct to Consumer / Partner Network (reported)

• UWMC (UWM HOLDINGS CORPORATION)
• FY2025 10-K: …do not submit any loans to us. For the last four years, we have been the largest overall originator of residential mortgage loans in the country despite only doing business with a fraction of the market. Our business is premised on our belief that the fastest, cheapest and easiest way for a borrower to obtain a…
• FY2025 10-K: …loan servicing operations are primarily regulated at the state level by state financial services authorities and administrative agencies, and at the federal level by the CFPB. The CFPB has federal regulatory, supervisory and enforcement authority over the residential mortgage loan origination and servicing industry,…
• PFSI (PennyMac Financial Services, Inc.)
• FY2025 10-K: 14.9 billion of mortgage loans subject to fulfillment fees, respectively, for PMT. ​ Consumer Direct Lending ​ According to Inside Mortgage Finance, the consumer direct lending channel represented approximately half of U.S. residential mortgage originations in 2025. We expect to grow our consumer direct lending…
• FY2025 10-K: …the District of Columbia, Puerto Rico, Guam and the United States Virgin Islands. Our consumer direct lending business is licensed to originate loans in all 50 states and the District of Columbia. ​ From time to time, we receive requests from states and Agencies and various investors for records, documents and…
• RITM (Rithm Capital Corp.)
• FY2025 10-K: …table provides information regarding gain on originated residential mortgage loans, HFS, net as a percentage of pull through adjusted lock volume, by channel: Year Ended December 31, (dollars in thousands) 2025 2024 Pull through adjusted lock volume $ 64,060,896 $ 59,322,537 Gain on Originated Residential Mortgage…
• FY2025 10-K: …$7.9 billion as compared to December 31, 2024, primarily reflecting new client acquisitions and loan production activity, partially offset by scheduled and voluntary loan prepayments. Revenue in the Origination and Servicing segment is generated primarily from residential mortgage loan originations and servicing.…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

Q1 2026 Form 10-Q · FY2025 Form 10-K · Q1 2026 Form 10-Q and FY2025 Form 10-K