PennyMac Financial Services Inc. (PFSI) Clearly Signals Buy-Into the Stock: Don’t ignore the signals

PennyMac Financial Services Inc. (NYSE: PFSI) stock jumped 8.47% on Friday to $57.11 against a previous-day closing price of $52.65. With 1.02 million shares changed hands, the volume of the stock remained heavier than its average volume of 0.52 million shares. During the session, the Mortgage Finance company that operates in wider Financial sector, reached to the highest price of $58.85 whereas the lowest price it dropped to was $56.23. The 52-week range on PFSI shows that it touched its highest point at $71.52 and its lowest point at $38.53 during that stretch. It currently has a 1-year price target of $64.12. With its current market cap of 3.06 billion, PFSI has annualized dividend of $0.80 while the current yield stands at 1.40%. Beta for the stock currently stands at 1.29.

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Price Performance and Earnings:

Stock performance is one of the indicators that investors use to determine whether they will profit from a stock. The price performance of PFSI was up-trending over the past week, with a rise of 5.82%, but this was up by 23.16% over a month. Three-month performance surged to 14.77% while six-month performance fell -6.35%. The stock lost -9.45% in the past year, while it has lost -18.16% so far this year. A look at the trailing 12-month EPS for PFSI yields 12.47 with Next year EPS estimates of 8.03. For the next quarter, that number is 1.10. This implies an EPS growth rate of -28.90% for this year and 20.37% for next year. EPS is expected to grow by 20.73% annually over the next five years; however, over the past five years, the company experienced an annual growth rate of 76.70%.

Float and Shares Shorts:

At present, 55.83 million PFSI shares are outstanding with a float of 32.35 million shares on hand for trading. On Jul 14, 2022, short shares totaled 2.9 million, which was 5.33% higher than short shares on Jun 14, 2022. In addition to Mr. David A. Spector as the firm’s CEO & Chairman, Mr. Douglas Edward Jones serves as its Pres & Chief Mortgage Banking Officer.

Institutional Ownership:

Through their ownership of 78.00% of PFSI’s outstanding shares, institutional investors have majority control over the company. Other institutions hold 62.31% of PFSI, in contrast to 24.93% held by mutual funds. Shares owned by individuals account for 108.72%. As the largest shareholder in PFSI with 28.91% of the stake, Highfields Capital Management LP holds 15,741,237 shares worth 15,741,237. A second-largest stockholder of PFSI, MFN Partners Management LP, holds 4,531,792 shares, controlling over 8.32% of the firm’s shares. T. Rowe Price Associates, Inc. is the third largest shareholder in PFSI, holding 4,518,483 shares or 8.30% stake. With a 2.34% stake in PFSI, the T Rowe Price Small Cap Stock Fund is the largest stakeholder. A total of 1,273,593 shares are owned by the mutual fund manager. The T Rowe Price Small Cap Value Fund, which owns about 2.22% of PFSI stock, is the second-largest Mutual Fund holder. It holds 1,209,694 shares valued at 52.88 million. Vanguard Total Stock Market Index holds 1.47% of the stake in PFSI, owning 797,464 shares worth 34.86 million.

Analysts Ratings:

Reading analyst opinions is an effective way to decide where to invest, and there are several opinions available for PFSI since 8 analysts follow the stock currently. There are 5 analysts who recommend BUY ratings, while 0 suggest SELL ratings. Of the remaining analysts, 2 believe that the stock is worth HOLDING, 1 give it an OVERWEIGHT rating, and 0 thinks that it’s UNDERWEIGHT. In the same way, a target price assigned to a stock can also reveal much about its potential. With PFSI analysts setting a high price target of $79.00 and a low target of $53.00, the average target price over the next 12 months is $64.13. Based on these targets, PFSI could surge 38.33% to reach the target high and fall by -7.2% to reach the target low. Reaching the average price target will result in a growth of 12.29% from current levels.

EPS: Estimates vs Actual

It is also common to use earnings estimates to evaluate a firm’s growth potential and to determine trading strategy. PFSI will report FY 2022 earnings on 02/02/2023. Analysts have provided yearly estimates in a range of $8.10 being high and $6.08 being low. For PFSI, this leads to a yearly average estimate of $6.73. The earnings surprise of a firm occurs when the actual results change from the consensus earnings estimate. PennyMac Financial Services Inc. reported $2.28 EPS against a consensus estimate of $2.28. The surprise factor in the prior quarter was $0.56. Based on analyst estimates, the high estimate for the next quarter is $2.03 and the low estimate is $0.46. The average estimate for the next quarter is thus $1.15.

Summary of Insider Activity:

Insiders traded PFSI stock several times over the past three months with 1 Buys and 8 Sells. In these transactions, 556 shares were bought while 75,000 shares were sold. The number of buy transactions has increased to 51 while that of sell transactions has risen to 58 over the past year. The total number of shares bought during that period was 2,258,843 while 338,842 shares were sold.

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