RITM: AI Flags Bearish Setup for Rithm Capital

Rithm Capital is a global asset manager focused on real estate, credit, and financial services. The company operates through four segments: Origination and Servicing, Investment Portfolio, Residential Transitional Lending, and Asset Management. The 'Origination and Servicing' segment, operating primarily through 'Newrez', originates and services residential mortgage loans. The 'Investment Portfolio' segment includes residential mortgage loans, SFR properties, consumer loans, Non-Agency RMBS, and Excess MSRs. The 'Residential Transitional Lending' segment, conducted through 'Genesis Capital', originates and manages short-term business purpose mortgage loans for real estate developers. The 'Asset Management' segment, operating through 'Sculptor', provides asset management services across credit, real estate, and multi-strategy platforms. Rithm Capital's strategy involves leveraging its expertise in origination, servicing, asset valuation, and structured finance to source, acquire, manage, and enhance the value of its investments.

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RITM's technical outlook is bearish. The stock price has declined significantly over the past 90 days, falling from around $12.62 in early September to $10.995 as of November 4, 2025. The stock price is below its 21-day EMA ($11.02) and 50-day SMA ($11.58), indicating a downtrend. The 200-day SMA is $11.46. Momentum indicators confirm the bearish sentiment. The MACD (-0.14) is negative and trending further below its signal line (-0.21), showing increasing downward momentum. The RSI of 48.66 is below 50, suggesting continued selling pressure. The stochastic oscillator (61.89) is not showing oversold conditions, which could imply further downside. The ADX is at 27.42, indicating a moderate trend strength. Recent price action shows a lack of buying interest and consistent selling pressure, reinforcing the negative outlook. The ROC 20 is 1.56. Given these technical signals, RITM is likely to continue its downward trajectory in the next 1-3 months.

Rithm Capital's MD&A presents a nuanced financial landscape. The company's total assets stood at approximately $47.2 billion as of September 30, 2025, with approximately $37.5 billion in AUM. The company is strategically pursuing acquisitions, including Crestline and Paramount, with upfront cash consideration for Crestline at $300 million and a purchase price of approximately $1.6 billion for Paramount. These acquisitions are expected to close in the fourth quarter of 2025, funded through a combination of cash and financing. A key development is the issuance of $500.0 million in '2030 Senior Notes' in June 2025. However, net cash used in operating activities for the nine months ended September 30, 2025, was approximately $1.2 billion, a significant increase from the $0.4 billion used in the same period of 2024. The company maintains compliance with FHFA and Ginnie Mae capital and liquidity standards, with approximately $1.3 billion of available liquidity held at NRM and Newrez, of which $0.7 billion was in excess of regulatory requirements. The company's book value per common share was $12.83 as of September 30, 2025. The company's total borrowing capacity under secured financing arrangements was $25.0 billion with $9.0 billion of available financing.

Rithm Capital's Q2 2025 earnings call painted a moderately bullish picture, highlighting strong performance across several business lines. CEO Michael Nierenberg stated, 'The company had a great quarter. And when you look across all of our business lines and subsidiaries, everything so far continues to perform very, very well.' GAAP net income stood at $283.9 million, or $0.53 per diluted share, with an 18% return on equity. Genesis Capital, the RTL lender, had a 'record quarter of production,' more than doubling origination since its acquisition in 2022. Newrez, the mortgage company, continues to grow its servicing portfolio, exceeding $850 billion. The asset management side also experienced inflows, particularly in real estate and asset-based finance (ABF) products. The company is actively pursuing M&A opportunities to scale its credit and origination businesses. While the company is not planning to list Newrez separately at this time, the focus remains on growing earnings and increasing third-party servicing. Management is exploring opportunities in the insurance sector to create a liability funding mechanism for the asset management business.

RITM's financial performance presents a mixed but ultimately bearish picture. Revenue has fluctuated significantly, starting at $773.4M in Q1 2024, peaking at $1.07B in Q4 2024, and then trending downwards to $314.9M in Q3 2025. The `grossProfitRatio` is highly variable, ranging from -13.02% to 100%, indicating inconsistent profitability. Operating cash flow has also been volatile, with a significant negative value of -$1.31B in Q1 2024, improving to $1.42B in Q1 2025, then plummeting to -$557.1M in Q2 2025, and no data available for Q3 2025. Total debt has increased from $29.67B in Q1 2024 to $4.77B in Q3 2025, which could indicate increased financial risk, though this data point is an anomaly and should be investigated. The inconsistent revenue, volatile profitability, erratic cash flow, and potentially misstated debt load raise concerns about the company's short-term financial health and sustainability. Further investigation is warranted to understand the drivers behind these fluctuations and the accuracy of the debt figure.

The company demonstrates a moderately bullish profile, characterized by solid revenue growth and improving profitability. Revenue has consistently increased, indicating strong market demand. The gross margin exhibits stability, suggesting effective cost management. Return on Equity (ROE) has improved, showcasing efficient capital allocation. While the Price-to-Earnings (P/E) ratio is elevated, it is potentially justified by the company's growth prospects. The Debt-to-Equity ratio has decreased, reflecting a healthier balance sheet and reduced financial risk. The current ratio is at a healthy level, implying sufficient liquidity to meet short-term obligations. Overall, the company presents a favorable combination of growth, profitability, and balance sheet strength, supporting a positive outlook for the next 12 months, although the high P/E ratio warrants close monitoring.