In the simple religion of Wall Street -- work hard, grow profits, and you'll be rewarded with an earthly paradise of high stock prices -- the folks at PHH Corp. feel a little like capitalism's version of Job.
The company appears to have done just about everything right. It has reported 12 straight quarters of improved profits, raised dividends almost yearly since going public in 1958 and shows every sign of continued profitability.
Yet PHH shares have suffered the investor's equivalent of a curse, with the stock price languishing below what it would bring the company were broken up and sold.
So where does that leave the Hunt Valley-based fleet management, relocation and mortgage company?
L "Frustrated is the word," said PHH Chairman Robert Kunisch.
The danger of a too-low stock price "is a concern to us," Mr. Kunisch said.
That's why Mr. Kunisch has mounted a campaign to make PHH -- one of the most anonymous of the nation's 100 biggest service companies -- a bigger name, on Wall Street as well as Main Street.
PHH executives have set aside extra time to meet with analysts and investor groups to talk up the stock. And over the last year, the company has started branching out from its corporate services core, to start selling services to members of groups as diverse as union members and federal retirees.
While deepening the enthusiasm of some shareholders, the campaign hasn't yet won over many new investors or done much to improve the stock price.
And some analysts warn that only a very dramatic move will waken Wall Street to PHH's value.
"Anything that in any way, shape or form has to do with housing, the stock market doesn't want to hear it. They want it to go away," explained Alex Hart, who follows the company for Ferris, Baker Watts in Baltimore.
Mr. Hart likes the company, and thinks it is being unfairly ignored. But does he think PHH can convince investors that its stock is really worth more? "Not necessarily."
In a presentation before the Baltimore Security Analysts on Thursday, Mr. Kunisch tried to win local converts for the 4,900-worker company, which has 1,036 employees in Maryland.
"We need more investors," he said. More investors would mean more trading, he said, and would result in a higher stock price. In fact, with 85 percent of the company's 17.3 million outstanding shares held by institutions, the company has fewer than 3,000 shareholders.
The company has been consistently profitable, and over the last three years has seen earnings rise between 10 and 15 percent a year, he said.
The next quarterly results, which will be reported before the end of the month, will likely continue that trend, he said.
So far this fiscal year, PHH has reported a 10 percent increase in profits, to $34.1 million, although revenues slipped 5 percent to $1 billion during its first half, which ended Oct. 31.
Bond analysts give the company very high ratings, indicating they believe PHH's debt load is easy to handle, and is being managed prudently.
The consensus of stock analysts' estimates shows faith that the double-digit earnings growth will continue through 1996.
And according to one widely watched ratio, the stock appears to be a real money-maker. At last week's price, investors would earn about 3.5 percent in dividends alone -- much higher than the average 2 percent dividend return of most stocks.
But the stock price, which closed the week at $37.875, is down about 10 percent from the year-ago price. PHH shares are selling for about nine times the company's projected earnings.
Most major public companies' shares sell for about 12 times projected earnings.
And company officials confirmed that last week's price is considerably below the liquidation value of the company,
although they declined to specify how much.
Stock price depressed
Company executives and many PHH investors believe the price is depressed because very few people understand how the company makes its money, and, so far, it has done little to make its name known outside of its customer base of corporate insiders.
Started in 1946 by Baltimoreans Duane L. Peterson, Richard M. Heather and Harley W. Howell, Peterson, Heather & Howell first managed corporate fleets of cars.
PHH, which changed its name to its founders' initials in 1978, now provides a variety of services to more than 2,000 companies around the world.
Besides arranging for the fueling, maintenance and disposal of JTC 312,000 company-owned cars and trucks, PHH is the nation's biggest provider of relocation services to corporations. Last year, it managed the moves of about 50,000 transferred executives.
Its four-year-old US Mortgage Corp. is now the nation's 20th-biggest mortgage lender. PHH made nearly 73,000 new home loans worth more than $8.1 billion last year.
And its business mix is getting more diversified all the time. PHH has recently branched out to find new services and new markets.
Late last year, it created and started selling a new auto club to members of associations, such as federal retirees.
And the company has started offering a prepaid telephone card to associations and businesses.
Even PHH executives sometimes have difficulty explaining how all the parts mesh.
The company's 1994 annual report, for example, is filled with abstract pictures of crystals, circular diagrams, and sentences such as: "PHH is the creator, initiator and manager of . . . continuous value exchange."
Thus, it is somewhat understandable if "Wall Street doesn't understand the company," said Richard Tutino, who manages a fund that holds about 160,000 PHH shares for Thorsell Parker Partners Inc. in Westport, Conn.
"It is a very difficult company to get a grip on. Its capital structure is not like a bank's or anyone else's," said Mr. Tutino, who describes himself as a fan of the company.
No comparable company
Because there is no comparable company that can be used to test PHH's performance, analysts and traders are afraid to promote the stock to investors, he said.
While he believes such concerns are unfounded, he said some investors may be worried by recent troubles at the company's vehicle and relocation divisions, which were restructured in 1993 because of widespread downsizings at customer corporations.
And other investors may be frightened off by PHH's large mortgage portfolio, fearing that rising interest rates will hammer profits the way they have with other lenders.
The market, he said, seems to be evaluating PHH like a bank. Bank stocks normally sell for about seven times their projected earnings.
Mr. Tutino believes that other investors eventually will wake up to PHH's true value.
But the company will help its case by increasing earnings, publicizing its name and story better, and continuing to reduce its reliance on the corporate market by beefing up its marketing to associations and affinity groups, he said.
If PHH can keep that up, its stock "will hit every radar screen in town" before 1995 is over, he predicted.
And that's just what Mr. Kunisch said PHH is aiming for.
He told the analysts last week that PHH is backing up its belief in the company by buying up shares. Last October, the company approved a 1.7-million share buyback program.
While the rise in interest rates has cut demand for PHH's mortgages, it has created additional business for PHH's other divisions by increasing cost pressures on corporations.
"As the economy slows down, more clients will outsource to us," he said.
The increases in other lines of business "are more than adequate to make up for" the declines in home loans, he said.
Tighter money also makes affinity groups such as unions increasingly eager to offer PHH's benefits programs, since PHH passes along a part of its profits on each mortgage, relocation or even telephone call to the sponsoring group, he said.
New businesses
And the company is starting several other new businesses to bring in new customers, he said.
For example, PHH has started managing troubled real estate for other lenders, is marketing a new computer program that helps people planning to move decide where to live, and may develop a title insurance company to service its mortgage holders.
While he recognizes the company and stockholders could make a lot of money by selling the mortgage division, Mr. Kunisch said he wants PHH to keep the division because it brings in customers who may buy some of PHH's other services.
PHH's poor name recognition "is a problem," he conceded, but is an outgrowth of its strategy of letting others -- such are corporations and trade associations -- do its marketing.
As the company reaches out to more consumers, that will change, though only slowly, he predicted.
"We're going to have to work on it," he said.