The housing market has been called the weakest link in the US economy. However, movement in housing prices over the last few months along with rising customers’ interest in buying new homes have caused many to have renewed hope and belief that the housing crisis has reached its low. As the housing market makes a comeback, a number of companies are perfectly positioned to reap the benefits. Not only are the companies expanding, their comparable net sales are rising by double digits, and some of the companies have raised their guidance profits. I believe the stocks are showing great promise and betray no sign of slowing down in the next few years. Here is a company that is widely praised as a hot prospect for further expansion as the housing sector rebounds.
Ellie Mae (NADAQ: ELLI) is a provider of in-demand automation solutions for the mortgage sector. Apart from also providing data and detailed insight into the business, it also offers effective and comprehensive end-to-end solutions, delivered by using a software-as-service model serving as the core operating system for mortgage originators and spans customer relations, loan origination, business management, and other relevant areas. Founded in 1997 and based in Pleasanton, California, it was recently voted third in a list of 40 best performing Russell 3,000 stocks year to date. While I think its great that Ellie Mae’s solutions are beloved by the mortgage sector, that’s not what gets me excited about the stock. Ellie Mae is also in the new line of providing core operating systems for the sector. What does pique my interest also are its software lines: Encompass, Encompass 360, and DataTrac Management software solutions.
In addition to giving insight to professionals in the mortgage industry, Ellie Mae is also host to the Ellie Mae Network, which allows Encompass users to electronically conduct business transactions with lenders and settlement service providers they work with to process and fund loans. Nearly 1,200 clients, partners, and mortgage industry professionals came to its National User Summit. 20% of all mortgage originators in the United States flow through its Encompass 360 mortgage management software and Ellie Mae Network.
With the housing sector still at such a comparatively early stage in its recovery, this is perhaps the time investors must think of the best play on the rebound of real estate. Ellie Mae turned in third-quarter earnings recently that were up 289%, nearly twice what analysts had forecast. Its revenue growth of 87% also soared past projections to end at $27.5 million, compared to $14.7 million in the third quarter of 2011. Net income for the third quarter 2012 was $6.8 million, or $0.25 per diluted shares, or compared to net income of $2.7, or $0.12 per diluted share, in the third quarter of 2011.
The company is going to be a major player in the mortgage industry in the coming years. The decision as to whether to trade in the housing sector in the first place rests with the individual trader, and depending on the strategy, Ellie Mae can prove a profitable venture.