Home Loan Servicing Solutions - Momentum
Since its third quarter results last week, shares of Home Loan Servicing Solutions, Ltd. ( HLSS ) have surged about 5.2% to hit a fresh 52-week high of $19.90 on October 22. It also has a solid year-to-date return of 51.3% and an expected long-term earnings growth rate of 5%. The rising share price and positive estimate revisions make this Zacks #1 Rank (Strong Buy) mortgage servicing company a solid momentum pick.
Stable Q3 Results
On October 18, Home Loan Servicing Solutions reported third quarter 2012 earnings of 34 cents per share, significantly ahead of last year's loss at $1.90. However, earnings were a penny below the Zacks Consensus Estimate. Year-over-year results benefited from solid top line growth, partially offset by higher expenses.
Total revenue stood at $28.5 million. The company's income from operations came in at $12.9 million, compared to a loss from operations of $0.038 million last year.
Earnings Momentum on the Rise
For 2012, the Zacks Consensus Estimate has gained 6.1% to $1.40 per share over the past 30 days, as 5 of 7 estimates were revised higher. For 2013, the Zacks Consensus Estimate is up 13.1% to $1.55, again on 5 upward revisions out of 7. This implies year-over-year growth of 10.9%.
Home Loan Servicing Solutions currently trades at 14.0x 12-month forward earnings, an 11% discount to the peer group average of 15.8x. Its price to book ratio of 0.66 is 7.0% below the peer group average of 0.71.
Chart Shows Strength
Home Loan Servicing Solutions has witnessed strong price momentum since the third quarter earnings release. Moreover, the company has been continuously outperforming its 50-day moving average since July 5. The year-to-date return for the stock is 51.3%, compared with the S&P 500's return of 5.0%.
Based in George Town, Cayman Islands, Home Loan Servicing is a mortgage investment company. Founded in 2010, the company together with its subsidiaries is engaged in acquiring mortgage servicing assets, mainly subprime and Alt-A mortgage servicing rights and associated servicing advances. With a market capital of approximately $277.7 million, Home Loan Servicing competes with Ellington Financial LLC ( EFC ), among others.
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