Onity shares surge 35% after record earnings, $10M buyback
Mortgage servicer delivers $185 million net income and $74 book value, trading at steep discount to assets
Onity Group shares rallied in pre-market trading Thursday after the mortgage servicer reported its strongest financial performance in more than a decade, including record net income of $185 million and a new $10 million share repurchase program.
The company, formerly known as Ocwen Financial Corporation, reported full-year 2025 diluted earnings per share of $21.46, marking its highest net income since 2013. Fourth quarter EPS reached $14.24, with quarterly return on equity surging to 89%.
The stock, which closed Wednesday at $41.15, trades at approximately 0.55 times book value of $74 per share—an exceptionally low multiple for a profitable financial services company. Analysts have set a target price of $55, representing roughly 34% upside from current levels.
"We are pleased to report another quarter of strong execution, delivering record full year results and significant progress on our transformation," said Onity's leadership team in the earnings announcement.
Onity's board authorized the share repurchase program on February 10, allowing the company to buy back up to $10 million of outstanding common stock through August 2026. The move signals management confidence in the valuation and available capital returns, coming as the stock trades near the lower end of its 52-week range of $25.50 to $54.10.
Total GAAP revenue grew 9% year-over-year to $1.1 billion, driven by expansion in the company's mortgage servicing portfolio. Total servicing unpaid principal balance reached $328 billion, with management projecting 5% to 15% growth in 2026.
The strong performance caps a transformative period for Onity, which rebranded from Ocwen Financial in June 2024 and began trading on the NYSE under the ticker ONIT. The company has pursued a strategy focused on operational efficiency, including implementing artificial intelligence across more than 190 processes by mid-2025 and using machine learning for risk prediction and customer experience enhancement.
In November 2025, Onity subsidiary PHH Mortgage entered a strategic relationship with Finance of America Reverse, selling reverse mortgage servicing rights for approximately 40,000 Ginnie Mae HECM loans while becoming a subservicer for those assets. The deal repositioned Onity's reverse mortgage business while maintaining ongoing revenue opportunities.
For 2026, Onity provided adjusted ROE guidance of 13% to 15%, or 16% to 18% excluding the impact of valuation allowance releases. While this represents a moderation from the exceptional 35% ROE achieved in 2025, it still indicates robust profitability for a mortgage servicer.
The company's operating margins remain strong at 55.1% over the trailing twelve months, supporting the view that Onity has successfully stabilized its business model following years of challenges under its previous Ocwen identity. The transformation included significant investments in technology and risk management, which appear to be paying dividends in the form of improved efficiency and earnings quality.
Institutional investors own approximately 59% of shares, with insiders holding 17%. The relatively low float of 6.3 million shares could contribute to volatility as investors digest the earnings results and position for potential further execution on the buyback program.
Onity's results come amid a challenging environment for mortgage servicers, as higher interest rates have compressed origination volumes across the industry. The company's focus on servicing rather than origination has provided some insulation from these headwinds, with servicing assets generating relatively stable fee-based income regardless of rate cycles.