Radian unit (NYSE: RDN), -1.9%NMI Holdings (NMI)NASDAQ: NMIH), -2.5%and BrightSpire Capital (NYSE: BRSP), -0.9%The stock fell in trading Tuesday morning after BTIG analyst Eric Hagen downgraded the lender to Neutral. because high interest rates greatly increase the cost of financing non-performing loans.
For Radian (RDN), in particular, Hagen pointed out that it has a lower capitalization rate than its peers. As a result, he prefers mortgage insurers with “higher returns, which we don’t offer much in the valuation,” he wrote in a statement.
The NMI (NMIH) definition, meanwhile, is driven by statistics, the expert said.
Although he expects the company to deliver “one of the strongest ROEs” in 2023, “we are concerned about paying for our earnings with uncertainty in the market.”
BrightSpire (BRSP), a mortgage REIT, “has reported a very scary story about future capital deployments, which makes it difficult to see a path to profitability” in the first half of next year, Hagen explained.
See how these three companies’ numbers compare to their peers in the peer section.
Also, see Searching for Alpha’s list of stocks with high credit ratings.