Rithm Capital (RITM) Seeking Alpha·2025-03-19 19:23Core Insights - The article focuses on analyzing Rithm Capital's (NYSE:RITM) recent performance and comparing it with 17 mortgage real estate investment trust (mREIT) peers, highlighting key metrics such as investment composition, leverage, hedging coverage ratio, and economic returns [1][2][3] Investment Composition and Performance - As of 12/31/2024, RITM's investment portfolio consisted of 18% fixed-rate agency MBS, 0% variable-rate agency MBS, 37% mortgage servicing rights (MSR), and 45% non-agency MBS and other mortgage-related investments [17][18] - RITM's book value (BV) per share increased from 12.56 at the end of Q4 2024, reflecting a quarterly increase of 2.03% [20] - The economic return for RITM in Q4 2024 was 4.06%, driven by rising mortgage interest rates and U.S. Treasury yields [20][21] Leverage and Hedging - RITM's on-balance sheet leverage ratio was 2.7x, while the at-risk leverage ratio was 0.9x as of 12/31/2024, indicating a slight increase in on-balance sheet leverage and a slight decrease in at-risk leverage compared to the previous quarter [18][19] - The hedging coverage ratio for RITM was geared towards lower mortgage interest rates, which helped mitigate BV volatility during periods of declining rates [46] Comparative Analysis with Peers - RITM's trailing 24-month economic return of 21.33% was significantly higher than the average returns of its mREIT peers, indicating strong performance relative to the sector [44] - RITM's current stock price of 12.50, suggesting that RITM is appropriately valued compared to its peers [41][47] Diversification and Future Outlook - RITM has diversified its investment portfolio through acquisitions, including Sculptor Capital Management and Specialized Loan Servicing, which are expected to drive future growth and returns [29][50] - The company's focus on MSR and related assets positions it well to benefit from rising interest rates, as these assets typically gain value in such environments [25][37]