Rocket Stock Just Broke Out, But EPS Growth Still Isn't Priced In

Key Points

• Rocket Companies stock has just broken out, though its future EPS growth is not at all priced in yet, giving investors a new opportunity.
• Institutional buyers are stepping in after realizing this wide gap higher, buying millions worth of stock.
• Fundamentally, the setup for this company is looking better than ever.

Most investors see a stock chart trading near highs and think they’ve missed the boat on the underlying opportunity. While that is sometimes true, there are times when the initial breakout is only the beginning of a much broader move in the future. As it turns out, there is one key financial ratio that investors need to always keep in mind to figure out whether the move is in its early stages or already done.

This ratio is the price-to-earnings-growth (PEG) ratio, and its purpose is solely to account for today’s valuation multiples about tomorrow’s expected earnings per share (EPS) growth. It makes absolute sense since investors are often willing to pay for a stock based on what they think it will generate in earnings in the future, making it highly reliable.

One stock that has recently broken out, but has yet to price in all of its future growth potential, is Rocket Companies Inc. NYSE: RKT. Investors will soon discover why the stock's PEG ratio indicates significant upside potential for the coming quarters, and how this relates to the broader mortgage industry and the real estate sector.

Why Rocket Companies Could Take Off Soon

Starting from the top, the current housing market has roughly 50% more listings available compared to the same season last year. This means, along with high interest rates on mortgages, that there isn’t a lot of buying demand for properties today (which should hurt Rocket’s business).

However, markets are forward-looking, so they don’t necessarily take today’s level of business activity at face value but rather focus on where this could be tomorrow. By doing so, investors can better understand where the current property supply and mortgage interest rates will need to revert.

If this outlook on housing supply and mortgage rates proves correct, Rocket Companies is positioned for EPS growth that could both justify its rally and sustain momentum moving forward. Even though it now trades at 92% of its 52-week high, driven by a one-month rally of 36.5%, Rocket Companies' stock still has a lot of room to move higher, and here is why.

Earnings Haven’t Been Priced In Yet

Despite the challenges posed by housing and mortgages, Rocket Companies reported 4 cents in earnings per share (EPS) for the latest quarter, exceeding the market’s expectations of only 3 cents.

This resilience was only the foundation for this double-digit rally. Still, investors need to remember that the future matters most. Wall Street analysts now expect Rocket Companies to report 12 cents in EPS for the fourth quarter of 2025, implying a tripling from today’s reported earnings.

Here is where the PEG ratio comes into play. This threefold EPS growth expectation for the future would need to command a forward price-to-earnings (P/E) ratio of just over 100.0x for this sort of growth to be priced in correctly, and today’s 24.1x multiple falls significantly below this benchmark.

That translates into a 0.1x PEG ratio, where a 1.0x figure means all growth has been priced in. Essentially, 90% of Rocket Companies’ future EPS growth has not been priced in yet, giving investors a massive upside opportunity before the rest of the market catches this view.

If anything, investors can look to the $416 million worth of institutional buying that has taken place over the most recent quarter, and take this signal as a vote of confidence coming from the “smart money” corners of the market, believing that this narrative is very much in place for Rocket Companies and its future potential.

Leading the pack are those from Boston Partners, who just boosted their holdings in Rocket Companies stock by 6.2% as of early August 2025. This new allocation brought their net position to a high of $206 million today, a significant amount for a company that has been relatively left behind in the other aggressive rallies seen in the broader economy.

Now investors have a fundamental reason rooted in the cyclical nature of real estate and interest rates and a quantitative driver behind the fact that this company is a growth engine in the making. Yet, today’s prices do not reflect even a fraction of that future growth, creating a massive gap to be filled on the upside with minimal inherent downside at the same time.