Walter Investment Management Corp (NYSE: WAC) shares were down big on the day after it reported earnings on March 14, 2017. The stock was down nearly 40% on the day, and markets participants exchanged 3.6M shares on Tuesday, over 11.04 times the 30-day average daily trading volume, according to OTC Markets. The stock had a 52-week range between $2.24 and $8.51 prior to the close on Tuesday. However, it hit a low of $1.50, marking a new 52-week low for the stock.
Walter Investment Management is not a typical investment management company. Rather, the corporation is a mortgage servicer, asset manager and portfolio owner specializing in subprime, non-conforming and other credit-challenged mortgage assets. That in mind, let’s take a look at why shares were down significantly after its financial results.
Fourth Quarter and Full Year 2016 Results
Walter Investment Management Corp reported a GAAP net loss of $529.2M, or ($14.71) per share for the fiscal year ended on Dec. 31, 2016. The company reported a net loss of $263.2M, or ($7) per share for the previous fiscal year. That said, the company failed to grow its net income year over. Instead, Walter Investment Management more than doubled its losses.
Walter Investment Manage CEO and President Anthony Renzi stated, “The performance we saw during fourth quarter 2016 and full-year 2016, is not acceptable to myself, our leadership team, our associates and the Walter Board of Directors. Since joining Walter in September, my focus has been on putting together a plan to reduce our cost structure and improve efficiency, with a strong emphasis on performance management and controls.”
Renzi added, “We also restructured our leadership team by adding key leaders to drive the way forward. I am excited to be a part of this organization and we are ready to face the challenges ahead, confident that the changes underway will put Walter in the best position to succeed but it will take time to implement and realize the benefits of these changes.”
Walter Investment Management Corp Performance
As of March 13, 2017, according to Morningstar, the stock has been down 15.62% over the past five trading days, underperfoming the industry by 14.98%. Additionally, Walter Investment Management Corp down -25.00%, while the specialty finance industry has been down -2.59% over the past month.
Here are some Key figures that traders are paying attention to:
– WAC had a market cap of $57,791,662, as of March 10, 2017. – Walter Investment Management Corp had 35,025,250 shares outstanding and a short interest of 5,734,232 shares, or 16.37% shares short.
– WAC had a trailing 12-month EPS of $-17.32, and it had revenue of $750,439,000.
– Walter Investment Management Corp reported total liabilities of $16,478,636,000 and total equity of $280,260,000 in its recent financial statements.
– WAC had a debt-to-equity ratio of 5,879%, indicating WAC has been taking on an extremely high amount of debt.
The stock lost over $500M for the 2016 fiscal year, more than double its net loss during the 2015 fiscal year. Moreover, the company has been taking on an abnormally high level of debt. The company has a debt-to-equity ratio of 5,879%, or 58.80. That means that for every $1 of stockholder equity, WAC has approximately $58.80 in total liabilities. Consequently, traders may want to get short this name for these reasons. However, these may not be the only bearish indicators for the name.
Now, although the company recorded a dismal net loss, and has been down over 60% on the year, there’s a bull case for WAC. Since the stock made new 52-week lows today, it would be considered a contrarian trade and investors may want to get in for a rebound. Moreover, the CEO is looking to change the structure of the company and increase efficiency, which could translate into earnings growth, potentially pushing the stock higher.