1 Question Rocket Companies Has to Answer

Rocket Companies (NYSE: RKT), the nation's largest mortgage originator and parent company of Quicken Loans, has gotten off to a volatile start since conducting its initial public offering. It started trading in early August around $21.50 per share, briefly dipped below $19 per share, and also got as high as $31.31 per share.

There is a lot of debate among investors over whether the company should be viewed -- and therefore valued -- as a financial technology company or a traditional mortgage originator. But I don't think this is the question Rocket needs to answer.

When Susquehanna analyst Jack Micenko initiated coverage on Rocket in early August, he said in a research note, "the challenge unfortunately is that while EBITDA margins for RKT are comparable to fintech margins today, they are highly dependent on volume and not sustainable through the cycle." And I think this is the question Rocket needs to answer. Right now, the mortgage market is sizzling, but can the company remain profitable when it cools? 

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Source Fool.com