Intrinsic value of New Residential Investment - NRZ

Previous Close

$17.14

  Intrinsic Value

$183.49

stock screener

  Rating & Target

str. buy

+971%

  Value-price divergence*

-81%

Previous close

$17.14

 
Intrinsic value

$183.49

 
Up/down potential

+971%

 
Rating

str. buy

 
Value-price divergence*

-81%

Our model is not good at valuating stocks of financial companies, such as NRZ.

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of NRZ stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 2016), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 5.3

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2016(a)
   2017
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  82.97
  60.00
  54.50
  49.55
  45.10
  41.09
  37.48
  34.23
  31.31
  28.68
  26.31
  24.18
  22.26
  20.53
  18.98
  17.58
  16.32
  15.19
  14.17
  13.26
  12.43
  11.69
  11.02
  10.42
  9.87
  9.39
  8.95
  8.55
  8.20
  7.88
  7.59
Revenue, $m
  1,257
  2,011
  3,107
  4,647
  6,743
  9,513
  13,078
  17,554
  23,050
  29,660
  37,462
  46,520
  56,875
  68,553
  81,565
  95,906
  111,562
  128,510
  146,723
  166,171
  186,826
  208,659
  231,650
  255,779
  281,036
  307,417
  334,926
  363,574
  393,381
  424,373
  456,586
Variable operating expenses, $m
 
  776
  1,199
  1,794
  2,603
  3,672
  5,048
  6,776
  8,897
  11,449
  14,460
  17,957
  21,954
  26,462
  31,484
  37,020
  43,063
  49,605
  56,635
  64,142
  72,115
  80,542
  89,417
  98,731
  108,480
  118,663
  129,281
  140,340
  151,845
  163,808
  176,242
Fixed operating expenses, $m
 
  159
  163
  167
  171
  175
  180
  184
  189
  194
  198
  203
  208
  214
  219
  224
  230
  236
  242
  248
  254
  260
  267
  274
  280
  287
  295
  302
  309
  317
  325
Total operating expenses, $m
  636
  935
  1,362
  1,961
  2,774
  3,847
  5,228
  6,960
  9,086
  11,643
  14,658
  18,160
  22,162
  26,676
  31,703
  37,244
  43,293
  49,841
  56,877
  64,390
  72,369
  80,802
  89,684
  99,005
  108,760
  118,950
  129,576
  140,642
  152,154
  164,125
  176,567
Operating income, $m
  622
  1,076
  1,745
  2,686
  3,969
  5,665
  7,850
  10,594
  13,964
  18,017
  22,803
  28,360
  34,713
  41,878
  49,862
  58,662
  68,269
  78,669
  89,846
  101,781
  114,457
  127,856
  141,966
  156,775
  172,276
  188,467
  205,350
  222,933
  241,226
  260,248
  280,018
EBITDA, $m
  622
  1,076
  1,745
  2,686
  3,969
  5,665
  7,850
  10,594
  13,964
  18,017
  22,803
  28,360
  34,713
  41,878
  49,862
  58,662
  68,269
  78,669
  89,846
  101,781
  114,457
  127,856
  141,966
  156,775
  172,276
  188,467
  205,350
  222,933
  241,226
  260,248
  280,018
Interest expense (income), $m
  350
  451
  768
  1,224
  1,864
  2,736
  3,888
  5,371
  7,233
  9,519
  12,268
  15,514
  19,281
  23,588
  28,446
  33,858
  39,823
  46,335
  53,384
  60,960
  69,049
  77,640
  86,722
  96,284
  106,321
  116,826
  127,799
  139,241
  151,157
  163,555
  176,446
Earnings before tax, $m
  622
  625
  977
  1,462
  2,105
  2,930
  3,962
  5,223
  6,731
  8,499
  10,535
  12,846
  15,432
  18,290
  21,416
  24,804
  28,446
  32,334
  36,462
  40,822
  45,408
  50,216
  55,244
  60,490
  65,955
  71,641
  77,551
  83,691
  90,069
  96,693
  103,572
Tax expense, $m
  39
  169
  264
  395
  568
  791
  1,070
  1,410
  1,817
  2,295
  2,845
  3,468
  4,167
  4,938
  5,782
  6,697
  7,680
  8,730
  9,845
  11,022
  12,260
  13,558
  14,916
  16,332
  17,808
  19,343
  20,939
  22,597
  24,319
  26,107
  27,965
Net income, $m
  504
  456
  713
  1,068
  1,536
  2,139
  2,892
  3,813
  4,913
  6,204
  7,691
  9,378
  11,265
  13,352
  15,634
  18,107
  20,766
  23,604
  26,617
  29,800
  33,148
  36,658
  40,328
  44,158
  48,147
  52,298
  56,612
  61,095
  65,751
  70,586
  75,608

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  291
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  18,400
  29,148
  45,033
  67,347
  97,718
  137,866
  189,533
  254,409
  334,056
  429,848
  542,933
  674,200
  824,274
  993,527
  1,182,101
  1,389,941
  1,616,836
  1,862,459
  2,126,415
  2,408,276
  2,707,617
  3,024,048
  3,357,239
  3,706,937
  4,072,983
  4,455,320
  4,854,002
  5,269,194
  5,701,174
  6,150,336
  6,617,182
Adjusted assets (=assets-cash), $m
  18,109
  29,148
  45,033
  67,347
  97,718
  137,866
  189,533
  254,409
  334,056
  429,848
  542,933
  674,200
  824,274
  993,527
  1,182,101
  1,389,941
  1,616,836
  1,862,459
  2,126,415
  2,408,276
  2,707,617
  3,024,048
  3,357,239
  3,706,937
  4,072,983
  4,455,320
  4,854,002
  5,269,194
  5,701,174
  6,150,336
  6,617,182
Revenue / Adjusted assets
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
  0.069
Average production assets, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Working capital, $m
  0
  1,006
  1,554
  2,323
  3,371
  4,756
  6,539
  8,777
  11,525
  14,830
  18,731
  23,260
  28,437
  34,277
  40,783
  47,953
  55,781
  64,255
  73,361
  83,086
  93,413
  104,330
  115,825
  127,889
  140,518
  153,709
  167,463
  181,787
  196,691
  212,187
  228,293
Total debt, $m
  13,181
  21,942
  34,968
  53,266
  78,170
  111,091
  153,458
  206,657
  271,967
  350,517
  443,246
  550,885
  673,946
  812,733
  967,364
  1,137,793
  1,323,846
  1,525,257
  1,741,701
  1,972,827
  2,218,287
  2,477,760
  2,750,977
  3,037,730
  3,337,887
  3,651,404
  3,978,323
  4,318,780
  4,673,004
  5,041,317
  5,424,130
Total liabilities, $m
  15,139
  23,901
  36,927
  55,225
  80,129
  113,050
  155,417
  208,616
  273,926
  352,476
  445,205
  552,844
  675,905
  814,692
  969,323
  1,139,752
  1,325,805
  1,527,216
  1,743,660
  1,974,786
  2,220,246
  2,479,719
  2,752,936
  3,039,689
  3,339,846
  3,653,363
  3,980,282
  4,320,739
  4,674,963
  5,043,276
  5,426,089
Total equity, $m
  3,260
  5,247
  8,106
  12,123
  17,589
  24,816
  34,116
  45,794
  60,130
  77,373
  97,728
  121,356
  148,369
  178,835
  212,778
  250,189
  291,030
  335,243
  382,755
  433,490
  487,371
  544,329
  604,303
  667,249
  733,137
  801,958
  873,720
  948,455
  1,026,211
  1,107,061
  1,191,093
Total liabilities and equity, $m
  18,399
  29,148
  45,033
  67,348
  97,718
  137,866
  189,533
  254,410
  334,056
  429,849
  542,933
  674,200
  824,274
  993,527
  1,182,101
  1,389,941
  1,616,835
  1,862,459
  2,126,415
  2,408,276
  2,707,617
  3,024,048
  3,357,239
  3,706,938
  4,072,983
  4,455,321
  4,854,002
  5,269,194
  5,701,174
  6,150,337
  6,617,182
Debt-to-equity ratio
  4.043
  4.180
  4.310
  4.390
  4.440
  4.480
  4.500
  4.510
  4.520
  4.530
  4.540
  4.540
  4.540
  4.540
  4.550
  4.550
  4.550
  4.550
  4.550
  4.550
  4.550
  4.550
  4.550
  4.550
  4.550
  4.550
  4.550
  4.550
  4.550
  4.550
  4.550
Adjusted equity ratio
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180
  0.180

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  504
  456
  713
  1,068
  1,536
  2,139
  2,892
  3,813
  4,913
  6,204
  7,691
  9,378
  11,265
  13,352
  15,634
  18,107
  20,766
  23,604
  26,617
  29,800
  33,148
  36,658
  40,328
  44,158
  48,147
  52,298
  56,612
  61,095
  65,751
  70,586
  75,608
Depreciation, amort., depletion, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Funds from operations, $m
  1,282
  456
  713
  1,068
  1,536
  2,139
  2,892
  3,813
  4,913
  6,204
  7,691
  9,378
  11,265
  13,352
  15,634
  18,107
  20,766
  23,604
  26,617
  29,800
  33,148
  36,658
  40,328
  44,158
  48,147
  52,298
  56,612
  61,095
  65,751
  70,586
  75,608
Change in working capital, $m
  721
  377
  548
  770
  1,048
  1,385
  1,783
  2,238
  2,748
  3,305
  3,901
  4,529
  5,178
  5,839
  6,506
  7,170
  7,828
  8,474
  9,106
  9,724
  10,327
  10,917
  11,495
  12,065
  12,629
  13,191
  13,755
  14,324
  14,903
  15,496
  16,106
Cash from operations, $m
  561
  79
  165
  298
  489
  753
  1,110
  1,575
  2,166
  2,899
  3,789
  4,849
  6,088
  7,512
  9,128
  10,936
  12,938
  15,130
  17,511
  20,076
  22,821
  25,741
  28,833
  32,093
  35,519
  39,107
  42,858
  46,771
  50,847
  55,090
  59,502
Maintenance CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
New CAPEX, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from investing activities, $m
  -183
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Free cash flow, $m
  378
  79
  165
  298
  489
  753
  1,110
  1,575
  2,166
  2,899
  3,789
  4,849
  6,088
  7,512
  9,128
  10,936
  12,938
  15,130
  17,511
  20,076
  22,821
  25,741
  28,833
  32,093
  35,519
  39,107
  42,858
  46,771
  50,847
  55,090
  59,502
Issuance/(repayment) of debt, $m
  25
  9,052
  13,026
  18,298
  24,904
  32,921
  42,368
  53,198
  65,310
  78,550
  92,730
  107,639
  123,061
  138,788
  154,631
  170,429
  186,053
  201,411
  216,444
  231,126
  245,460
  259,474
  273,217
  286,752
  300,158
  313,517
  326,919
  340,457
  354,224
  368,313
  382,813
Issuance/(repurchase) of shares, $m
  280
  1,530
  2,146
  2,949
  3,930
  5,088
  6,408
  7,865
  9,423
  11,039
  12,664
  14,250
  15,748
  17,114
  18,309
  19,304
  20,075
  20,608
  20,895
  20,935
  20,734
  20,300
  19,646
  18,788
  17,741
  16,523
  15,150
  13,640
  12,006
  10,263
  8,424
Cash from financing (excl. dividends), $m  
  164
  10,582
  15,172
  21,247
  28,834
  38,009
  48,776
  61,063
  74,733
  89,589
  105,394
  121,889
  138,809
  155,902
  172,940
  189,733
  206,128
  222,019
  237,339
  252,061
  266,194
  279,774
  292,863
  305,540
  317,899
  330,040
  342,069
  354,097
  366,230
  378,576
  391,237
Total cash flow (excl. dividends), $m
  542
  10,662
  15,338
  21,544
  29,323
  38,763
  49,885
  62,638
  76,898
  92,488
  109,184
  126,738
  144,897
  163,414
  182,068
  200,669
  219,066
  237,149
  254,850
  272,136
  289,014
  305,515
  321,696
  337,634
  353,417
  369,147
  384,927
  400,868
  417,078
  433,666
  450,739
Retained Cash Flow (-), $m
  -464
  -1,987
  -2,859
  -4,017
  -5,467
  -7,227
  -9,300
  -11,678
  -14,336
  -17,243
  -20,355
  -23,628
  -27,013
  -30,466
  -33,943
  -37,411
  -40,841
  -44,212
  -47,512
  -50,735
  -53,881
  -56,958
  -59,974
  -62,946
  -65,888
  -68,821
  -71,763
  -74,734
  -77,757
  -80,849
  -84,032
Prev. year cash balance distribution, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  8,675
  12,478
  17,528
  23,856
  31,536
  40,585
  50,960
  62,562
  75,245
  88,828
  103,110
  117,883
  132,948
  148,125
  163,258
  178,225
  192,937
  207,337
  221,402
  235,132
  248,557
  261,722
  274,688
  287,529
  300,326
  313,164
  326,133
  339,321
  352,817
  366,707
Discount rate, %
 
  13.10
  13.76
  14.44
  15.16
  15.92
  16.72
  17.56
  18.43
  19.35
  20.32
  21.34
  22.41
  23.53
  24.70
  25.94
  27.23
  28.60
  30.03
  31.53
  33.10
  34.76
  36.50
  38.32
  40.24
  42.25
  44.36
  46.58
  48.91
  51.35
  53.92
PV of cash for distribution, $m
 
  7,670
  9,643
  11,694
  13,562
  15,065
  16,051
  16,426
  16,163
  15,308
  13,966
  12,283
  10,419
  8,528
  6,736
  5,135
  3,779
  2,683
  1,837
  1,213
  772
  473
  279
  158
  86
  45
  22
  11
  5
  2
  1
Current shareholders' claim on cash, %
  100
  77.6
  62.0
  50.7
  42.2
  35.9
  30.9
  27.1
  24.1
  21.6
  19.6
  18.0
  16.7
  15.6
  14.7
  13.9
  13.2
  12.7
  12.2
  11.8
  11.5
  11.2
  11.0
  10.7
  10.6
  10.4
  10.3
  10.2
  10.1
  10.1
  10.0

New Residential Investment Corp. is a real estate investment trust (REIT). The Company focuses on investing in, and managing, investments related to residential real estate. The Company's segments include investments in excess mortgage servicing rights (Excess MSRs); investments in mortgage servicing rights (MSRs); investments in servicer advances; investments in real estate securities; investments in residential mortgage loans; investments in consumer loans, and corporate. Its portfolio includes mortgage servicing related assets, residential mortgage backed securities (RMBS), residential mortgage loans and other investments. The Company's servicing related assets include its investments in Excess MSRs, MSRs and servicer advances. The Company invests in agency RMBS and non-agency RMBS. The Company's other investments consist of consumer loans.

FINANCIAL RATIOS  of  New Residential Investment (NRZ)

Valuation Ratios
P/E Ratio 8.5
Price to Sales 3.4
Price to Book 1.3
Price to Tangible Book
Price to Cash Flow 7.7
Price to Free Cash Flow 7.7
Growth Rates
Sales Growth Rate 83%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate NaN%
Cap. Spend. - 3 Yr. Gr. Rate NaN%
Financial Strength
Quick Ratio 0
Current Ratio NaN
LT Debt to Equity 245.1%
Total Debt to Equity 404.3%
Interest Coverage 3
Management Effectiveness
Return On Assets 5%
Ret/ On Assets - 3 Yr. Avg. 5.4%
Return On Total Capital 3.3%
Ret/ On T. Cap. - 3 Yr. Avg. 3.7%
Return On Equity 16.6%
Return On Equity - 3 Yr. Avg. 17.9%
Asset Turnover 0.1
Profitability Ratios
Gross Margin 59.5%
Gross Margin - 3 Yr. Avg. 60.4%
EBITDA Margin 77.3%
EBITDA Margin - 3 Yr. Avg. 78.1%
Operating Margin 49.4%
Oper. Margin - 3 Yr. Avg. 51.1%
Pre-Tax Margin 49.5%
Pre-Tax Margin - 3 Yr. Avg. 51.1%
Net Profit Margin 40.1%
Net Profit Margin - 3 Yr. Avg. 42.7%
Effective Tax Rate 6.3%
Eff/ Tax Rate - 3 Yr. Avg. 2.4%
Payout Ratio 85.9%

NRZ stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NRZ stock intrinsic value calculation we used $1257 million for the last fiscal year's total revenue generated by New Residential Investment. The default revenue input number comes from 2016 income statement of New Residential Investment. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our NRZ stock valuation model: a) initial revenue growth rate of 60% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 13.1%, whose default value for NRZ is calculated based on our internal credit rating of New Residential Investment, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of New Residential Investment.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of NRZ stock the variable cost ratio is equal to 38.6%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $155 million in the base year in the intrinsic value calculation for NRZ stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for New Residential Investment.

Corporate tax rate of 27% is the nominal tax rate for New Residential Investment. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the NRZ stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for NRZ are equal to 0%.

Life of production assets of 10 years is the average useful life of capital assets used in New Residential Investment operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for NRZ is equal to 50%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $3260 million for New Residential Investment - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 309.266 million for New Residential Investment is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of New Residential Investment at the current share price and the inputted number of shares is $5.3 billion.

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IVR Invesco Mortga 17.67 16.21  hold
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ACRE Ares Commercia 13.55 28.22  str.buy

COMPANY NEWS

▶ Stocks With Rising Relative Strength: Armour Residential REIT   [Sep-27-17 03:00AM  Investor's Business Daily]
▶ Ocwen Keeps Clawing Its Way Back   [Aug-02-17 01:30PM  Motley Fool]
▶ New Residential Investment posts 2Q profit   [Jul-31-17 10:06PM  Associated Press]
▶ New Residential Falls as Mortgage Rates Head Lower   [Jun-20-17 11:04AM  Barrons.com]
▶ New Residential Investment posts 1Q profit   [May-01-17 07:26AM  Associated Press]
▶ Here's Why Ocwen Financial Corp. Plunged Today   [Apr-20-17 05:35PM  Motley Fool]
▶ Income-REIT New Residential Investment Looks Worth It   [Apr-12-17 04:43PM  TheStreet.com]
▶ Top Ranked Income Stocks to Buy for March 10th   [Mar-10-17 09:01AM  Zacks]
▶ Top Ranked Income Stocks to Buy for March 2nd   [Mar-02-17 10:02AM  Zacks]
▶ New Residential Investment posts 4Q profit   [01:51PM  Associated Press]
▶ Weekly CEO Buys Highlights   [Feb-13-17 12:55PM  GuruFocus.com]
▶ [$$] Citigroup Exiting Business of Servicing Mortgages   [Jan-31-17 12:34AM  at The Wall Street Journal]
▶ [$$] Citigroup Exiting Business of Servicing Mortgages   [06:55AM  at The Wall Street Journal]
▶ New Residential Announces Tax Treatment of 2016 Dividends   [Jan-27-17 07:05PM  Business Wire]
▶ KBW: Wary of Mortgage Finance Stocks, Especially STC   [Jan-09-17 02:41PM  at Barrons.com]
▶ Why Silver Wheaton, Endologix, and PHH Corp. Jumped Today   [Dec-29-16 05:14PM  at Motley Fool]
▶ Do Hedge Funds Love Spirit Airlines Incorporated (SAVE)?   [Nov-26-16 06:35AM  at Insider Monkey]
▶ 4 High-Yield Stocks Worth the Risk   [Aug-20-16 09:46AM  at Kiplinger]
▶ New Residential Announces Public Offering of Common Stock   [Aug-10-16 04:19PM  Business Wire]
▶ Walter Investment Management taps mortgage veteran to lead company   [Aug-09-16 01:10PM  at bizjournals.com]
Financial statements of NRZ
Valuation of Stocks

The paper VALUATION OF STOCKS: The Quest for Intrinsic Value provides a detailed description of our valuation model and discloses the calculation algorithm.

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