Mr Cooper Group Inc (COOP)

[JusticeWillWin]

Many important statements why COOP is UNDERVALUED

From the earnings call transcript: https://www.fool.com/earnings/call-transcripts/2020/10/30/mr-cooper-group-inc-coop-q3-2020-earnings-call-tra/

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As Chairman and CEO of Mr. Cooper, it's generally my practice to comment on financial results rather than the stock price.

But I do think it's appropriate for me to point out that our valuation, which is below 1 times tangible book value and less than 6 times 2021 consensus earnings doesn't seem consistent with the results we just shared with you, whether it's the 51% ROTCE or the stronger balance sheet. Also, as a reminder, Xome is a very valuable asset, which does not show up in book value. And in our opinion, its value is not appropriately reflected in our share price.

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On the third anniversary of the merger which will be in August 2021, we will have significantly more flexibility. At that time, if the stock price still looks undervalued to us, we will be in a position to consider a much larger return of capital. In the meantime, we have cash available to deploy into the servicing portfolio. You should see solid growth in UPB in the fourth quarter and we look forward to welcoming these new customers and working with them in the months and years to come.

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Now on the subject to our stock price, I'd like to add my personal opinion that the market is failing to recognize the real value of Xome, which is an outstanding technology-driven business with an excellent management team. As a reminder, Xome operates in four segments. Our title broker is called Title 365 and the team has done a tremendous job putting it on track to generate about $60 million in pre-tax income this year.

Title 365 also owns a 49% stake in X1 Analytics, which offers an industry-leading automated title data and decisioning engine.

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I'm just saying there are options. Xome is an unrestricted subsidiary. We could put debt on Xome. It doesn't carry anything today.

I'm just saying there are ways to demonstrate that Xome has real value. And today, because it didn't show up in our book value, I think a lot of investors, Mark, I'm not suggesting this is you, but do not understand how to properly value it. It certainly shouldn't hold a piece -- the price to earnings multiple that you signed to a mortgage company. I mean the auction platform is a very high-tech proprietary platform.

And I think its competitor probably has a multiple in the high double-digits. So that's one thing, I'd say the title companies are trading at 9.5 times or 10 times earnings. So if you were to apply those multiples, you'd see the value of Xome is quite significant and our real message is it's not captured. So we are going to do something to convert that value into an improvement in our stock price.
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And regarding Section 382, which limited the current share repurchase program to ~ $100 million until August, but later, there is no limit:

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Yeah. This is Chris, Mark. There is a -- essentially a 10% safe harbor on buying back shares in the first three years after a merger. So 382 essentially limits that and that's how we size the $100 million buyback.

So you should think of that as our limit through August of -- you know next summer, August of next year. After which, I think our message was, let's hope our stock improves in value, where it is today and what we expect to build in book value over the next five quarters, we think the stock has tremendous value. If our stock was trading where it was today in August, we'd be buying our shares back in a far more aggressive way.
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