Is Rocket Companies (RKT) Stock a Buy, Sell, or Hold Near Its 52-Week Low?

Source The Motley Fool

Key Points

  • Rocket Companies encompasses mortgages, house-hunting, closing services, loans, and more.

  • High interest rates have not been good for business.

  • However, the company's future seems quite promising.

  • 10 stocks we like better than Rocket Companies ›

Shares of Rocket Companies (NYSE: RKT) were recently trading for $11.79 per share, not far from their 52-week low of $10.99. That's nearly 52% below the 52-week high of $24.36, and it's enough to make investors and would-be investors wonder: Is the stock now bargain-priced? Is something going on that would make it a sell?

Let's take a look.

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Someone in a striped shirt is scratching her head, in uncertainty.

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If you're intrigued, thinking it would be nice to have an aerospace business in your portfolio, think again. Rocket Companies is a real estate enterprise, encompassing Rocket Mortgage, Redfin, Rocket Close, Rocket Money, and Rocket Loans. The company notes that "J.D. Power has ranked Rocket Mortgage #1 in client satisfaction for primary mortgage origination and mortgage servicing a total of 23 times -- the most of any mortgage lender."

Why invest in Rocket Companies?

The stock's valuation looks attractive, with a recent forward-looking price-to-earnings (P/E) ratio of 15, well below the five-year average of 23.

The business model is also attractive, as it's an online and app-based lender. Having no brick-and-mortar facilities can help maintain high profit margins. And like many companies, it has been adding artificial intelligence (AI) technologies to its offerings.

Interest rates these days are high, with the 30-year fixed-rate loan recently averaging 7.4%. But whenever they fall, that will boost Rocket's mortgage and refinancing business.

Meanwhile, the company is growing its market share and positioning itself for more growth.

Why you might avoid Rocket Companies

Well, it's a volatile stock, so it's not for the faint of heart or risk-averse. Its beta, for example, was recently 2.25. Beta is a measure of volatility, with a beta of 1.0 suggesting that a stock will rise (or fall) by about as much as the overall market, and a beta above 1.0 indicating greater volatility.

I myself am not rushing to snap up shares right now, in part because I'm favoring dividend payers, but I think long-term investors who buy now may do well.

Should you buy stock in Rocket Companies right now?

Before you buy stock in Rocket Companies, consider this:

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Selena Maranjian has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Rocket Companies. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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