MCHB

We rate HomeStreet, Inc. (MCHB) as Avoid with a composite score of 38.0/100 at a current price of $14.67. The stock falls in the bottom quintile of our universe across key quantitative factors, and the multi-factor weakness suggests a high probability of continued underperformance.

The rating is primarily driven by strength in stability (45th percentile) and value (36th percentile), which together account for the majority of the composite score. Offsetting weakness in quality (32th percentile) and momentum (33th percentile) tempers our overall conviction. We assign a Narrow Moat rating (41/100), Medium uncertainty, and Standard capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

HomeStreet, Inc. holds a top-quartile position (#0 of 50) within the Finance, Insurance, And Real Estate sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 38.0/100 places it at rank #3780 in our full 7,333-stock universe. At $252M in market capitalization, HomeStreet, Inc. is a small-cap player in the Finance, Insurance, And Real Estate space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue contraction of -71% combined with momentum at the 33th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 0% (-76.5pp vs sector) narrow to operating margins of 363% (+346.2pp vs sector) and net margins of 113.1%, yielding a gross-to-net conversion rate of N/A%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $14.67, HomeStreet, Inc. is trading at a premium to fundamental value. Our value factor score of 36/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. The premium valuation implies the market is pricing in significant future growth or quality improvements that are not yet fully reflected in current fundamentals.

The stock currently trades at a P/E of 39.6x (a 232% premium to the sector median of 11.9x), EV/EBITDA of 28.3x (at a premium), P/B of 1.2x, P/S of 13.4x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a Medium uncertainty rating to HomeStreet, Inc.. The stock presents a balanced risk profile: weak quality scores (32th percentile). While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: weak quality scores (32th percentile). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 45th percentile and quality factor at the 32th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: conservative leverage (7% D/E) limits balance sheet risk. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate HomeStreet, Inc.'s capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 3.1%, and the balance sheet is managed within acceptable parameters (D/E: 7%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; HomeStreet, Inc. falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. Absent a dividend, the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, HomeStreet, Inc. receives a Avoid rating with a composite score of 38.0/100 (rank #3780 of 7,333). Our quantitative framework assigns a Narrow Moat (41/100, trend: stable), Medium uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 36/100.

Our analysis does not support a constructive view on HomeStreet, Inc. at this time. The combination of the current quantitative profile, medium uncertainty, and standard capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.