PennyMac Mortgage Investment Trust (PMT)
PennyMac Mortgage Investment Trust is up against the odds. Its low returns on capital and plummeting sales suggest it struggles to generate demand and profits, a red flag.― StockStory Analyst Team
1. News
2. Summary
Why We Think PennyMac Mortgage Investment Trust Will Underperform
Operating as a real estate investment trust since 2009 to maintain tax advantages, PennyMac Mortgage Investment Trust (NYSE:PMT) is a specialty finance company that invests in mortgage-related assets and operates a correspondent lending business.
- Customers postponed purchases of its products and services this cycle as its revenue declined by 21.6% annually over the last five years
- Falling earnings per share over the last two years has some investors worried as stock prices ultimately follow EPS over the long term
- Loan losses and capital returns have eroded its tangible book value per share this cycle as its tangible book value per share declined by 5.2% annually over the last five years
PennyMac Mortgage Investment Trust is in the doghouse. There’s a wealth of better opportunities.
Why There Are Better Opportunities Than PennyMac Mortgage Investment Trust
At $12.89 per share, PennyMac Mortgage Investment Trust trades at 0.8x forward P/B. PennyMac Mortgage Investment Trust’s valuation may seem like a bargain, especially when stacked up against other banking companies. We remind you that you often get what you pay for, though.
It’s better to pay up for high-quality businesses with higher long-term earnings potential rather than to buy lower-quality stocks because they appear cheap. These challenged businesses often don’t re-rate, a phenomenon known as a “value trap”.
3. PennyMac Mortgage Investment Trust (PMT) Research Report: Q3 CY2025 Update
Mortgage REIT PennyMac Mortgage Investment Trust (NYSE:PMT) reported Q3 CY2025 results topping the market’s revenue expectations, with sales up 22.7% year on year to $99.23 million. Its GAAP profit of $0.55 per share was 48.7% above analysts’ consensus estimates.
PennyMac Mortgage Investment Trust (PMT) Q3 CY2025 Highlights:
- Net Interest Income: $99.23 million vs analyst estimates of -$8.13 million (1,320% beat)
- Net Interest Margin: 4.9%
- Revenue: $99.23 million vs analyst estimates of $97.15 million (22.7% year-on-year growth, 2.1% beat)
- EPS (GAAP): $0.55 vs analyst estimates of $0.37 (48.7% beat)
- Tangible Book Value per Share: $15.16 vs analyst estimates of $15.55 (5.6% year-on-year decline, 2.5% miss)
- Market Capitalization: $1.03 billion
Company Overview
Operating as a real estate investment trust since 2009 to maintain tax advantages, PennyMac Mortgage Investment Trust (NYSE:PMT) is a specialty finance company that invests in mortgage-related assets and operates a correspondent lending business.
PMT's business model revolves around three main segments. Through its Correspondent Production segment, the company acts as an intermediary between smaller mortgage lenders and the capital markets, purchasing newly originated prime-quality loans and then selling them to government-sponsored entities like Fannie Mae and Freddie Mac or into Ginnie Mae securitizations. This activity generates fee income and creates investment opportunities in mortgage servicing rights (MSRs).
The Interest Rate Sensitive Strategies segment manages investments in MSRs, agency mortgage-backed securities (MBS), and related interest rate hedging activities. MSRs represent the right to collect payments for servicing mortgage loans, generating income streams that typically increase when interest rates rise.
The Credit Sensitive Strategies segment focuses on investments that carry credit risk, including credit risk transfer (CRT) arrangements, subordinate mortgage-backed securities, and distressed loans. CRT investments allow PMT to assume some of the credit risk from government-sponsored entities in exchange for potential returns.
PMT is externally managed by PNMAC Capital Management, a subsidiary of PennyMac Financial Services, Inc. (NYSE:PFSI), which handles investment decisions. Another PFSI subsidiary, PennyMac Loan Services, performs loan production and servicing activities on PMT's behalf. This relationship with PFSI provides operational expertise but creates potential conflicts of interest due to the fee structure.
As a REIT, PMT must distribute at least 90% of its taxable income to shareholders annually to maintain its tax-advantaged status. This structure appeals to income-focused investors seeking dividend yields that often exceed those of traditional stocks.
4. Thrifts & Mortgage Finance
Thrifts & Mortgage Finance institutions operate by accepting deposits and extending loans primarily for residential mortgages, earning revenue through interest rate spreads (difference between lending rates and borrowing costs) and origination fees. The industry benefits from demographic tailwinds as millennials enter prime homebuying age, technological advancements streamlining the loan approval process, and potential interest rate stabilization improving affordability. However, significant headwinds include net interest margin compression during rate volatility, increased competition from fintech disruptors offering digital-first experiences, mounting regulatory compliance costs, and potential housing market corrections that could impact loan portfolios and default rates.
PMT competes with other mortgage REITs including Chimera Investment Corporation (NYSE:CIM), Invesco Mortgage Capital (NYSE:IVR), Rithm Capital (NYSE:RITM), MFA Financial (NYSE:MFA), New York Mortgage Trust (NASDAQ:NYMT), Redwood Trust (NYSE:RWT), and Two Harbors Investment (NYSE:TWO).
5. Sales Growth
In general, banks make money from two primary sources. The first is net interest income, which is interest earned on loans, mortgages, and investments in securities minus interest paid out on deposits. The second source is non-interest income, which can come from bank account, credit card, wealth management, investing banking, and trading fees. Over the last five years, PennyMac Mortgage Investment Trust’s demand was weak and its revenue declined by 21.6% per year. This was below our standards and is a sign of lacking business quality.
Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. PennyMac Mortgage Investment Trust’s annualized revenue declines of 9.6% over the last two years suggest its demand continued shrinking. 
Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.
This quarter, PennyMac Mortgage Investment Trust reported robust year-on-year revenue growth of 22.7%, and its $99.23 million of revenue topped Wall Street estimates by 2.1%.
Net interest income made up -1.2% of the company’s total revenue during the last five years, meaning PennyMac Mortgage Investment Trust is well diversified and has a variety of income streams driving its overall growth. Nevertheless, net interest income is critical to analyze for banks because they’re considered a higher-quality, more recurring revenue source by investors.
Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.6. Earnings Per Share
We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.
PennyMac Mortgage Investment Trust’s EPS grew at an astounding 146% compounded annual growth rate over the last five years, higher than its 21.6% annualized revenue declines. However, this alone doesn’t tell us much about its business quality because its efficiency ratio didn’t improve.
Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.
For PennyMac Mortgage Investment Trust, its two-year annual EPS declines of 9% mark a reversal from its (seemingly) healthy five-year trend. We hope PennyMac Mortgage Investment Trust can return to earnings growth in the future.
In Q3, PennyMac Mortgage Investment Trust reported EPS of $0.55, up from $0.36 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects PennyMac Mortgage Investment Trust’s full-year EPS of $0.91 to grow 69.2%.
7. Tangible Book Value Per Share (TBVPS)
Banks profit by intermediating between depositors and borrowers, making them fundamentally balance sheet-driven enterprises. Market participants emphasize balance sheet quality and sustained book value growth when evaluating these institutions.
Because of this, tangible book value per share (TBVPS) emerges as the critical performance benchmark. By excluding intangible assets with uncertain liquidation values, this metric captures real, liquid net worth per share. On the other hand, EPS is often distorted by mergers and flexible loan loss accounting. TBVPS provides clearer performance insights.
PennyMac Mortgage Investment Trust’s TBVPS declined at a 5.4% annual clip over the last five years. On a two-year basis, TBVPS fell at a slower pace, dropping by 3.3% annually from $16.22 to $15.16 per share.
Over the next 12 months, Consensus estimates call for PennyMac Mortgage Investment Trust’s TBVPS to shrink by 1.4% to $14.95, a sour projection.
8. Return on Equity
Return on equity (ROE) measures how effectively banks generate profit from each dollar of shareholder equity - a critical funding source. High-ROE institutions typically compound shareholder wealth faster over time through retained earnings, share repurchases, and dividend payments.
Over the last five years, PennyMac Mortgage Investment Trust has averaged an ROE of 5.1%, uninspiring for a company operating in a sector where the average shakes out around 7.5%.
9. Key Takeaways from PennyMac Mortgage Investment Trust’s Q3 Results
It was good to see PennyMac Mortgage Investment Trust beat analysts’ EPS expectations this quarter. We were also excited its net interest income outperformed Wall Street’s estimates by a wide margin. On the other hand, its tangible book value per share missed. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 3.9% to $12.15 immediately following the results.
10. Is Now The Time To Buy PennyMac Mortgage Investment Trust?
Updated: December 3, 2025 at 11:25 PM EST
When considering an investment in PennyMac Mortgage Investment Trust, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.
PennyMac Mortgage Investment Trust doesn’t pass our quality test. To begin with, its revenue has declined over the last five years. And while its net interest income growth was exceptional over the last five years, the downside is its estimated sales for the next 12 months are weak. On top of that, its TBVPS has declined over the last five years.
PennyMac Mortgage Investment Trust’s P/B ratio based on the next 12 months is 0.8x. While this valuation is reasonable, we don’t see a big opportunity at the moment. There are superior stocks to buy right now.
Wall Street analysts have a consensus one-year price target of $13.57 on the company (compared to the current share price of $12.89).