From a valuation perspective, Ellington Residential (USA Stocks: EARN) seems to be undervalued. The company's current Price to Earnings ratio stands at
2.40X, which is significantly lower than the industry average, suggesting that the stock could be undervalued. Furthermore, the company's Book Value Per Share is
7.32X, while its Price Book ratio is only
0.9616, indicating that the market may not be fully pricing in the company's assets. However, the company's high Debt to Equity ratio of
8.04% could be a cause for concern. Despite these mixed signals, the company's undervaluation could make it a potential candidate for a market adjustment.
Important Points
Ellington Residential presently has liabilities worth 729.54M, with a Debt to Equity (D/E) ratio of 8.04, suggesting potential challenges in generating sufficient cash to meet its financial obligations. Its current ratio stands at 0.17, signaling a negative working capital and potential difficulties in meeting financial obligations when due. While debt can aid Ellington Residential, failure to settle it could result in shareholders losing their investment. A common scenario is the company selling additional shares at low prices, diluting existing shareholders' value. However, debt can also be an effective tool for investing in high-return growth. Ellington's use of debt should always be considered alongside cash and equity. We offer trading advice to supplement the current expert consensus on Ellington Residential, using a multidimensional algorithm to analyze the company's growth potential based on all available technical and fundamental data.
We determine the current worth of Ellington Residential Mortgage using both absolute as well as relative valuation methodologies to arrive at its intrinsic value. In general, an absolute valuation paradigm, as applied to this company, attempts to find the value of Ellington Residential based exclusively on its
fundamental and basic
technical indicators. By analyzing Ellington Residential's
financials, quarterly and monthly indicators, and related drivers such as
dividends, operating cash flow, and various types of growth rates, we attempt to find the most accurate representation of
Ellington Residential's intrinsic value. In some cases, mostly for established, large-cap companies, we also incorporate more traditional valuation methods such as dividend discount, discounted cash flow, or asset-based models. As compared to an absolute model, our relative valuation model uses a comparative analysis of Ellington Residential. We calculate exposure to Ellington Residential's
market risk, different
technical and
fundamental indicators, relevant financial multiples and ratios, and then
comparing them to Ellington Residential's related companies.
Ellington Residential Investment Alerts
Ellington investment alerts and warnings help investors to get more proficient at understanding not only critical technical and fundamental signals but also the significant portfolio-centered indicators. These indicators include beta, alpha, and other risk-related measures that will help you in monitoring Ellington Residential Mortgage performance across your portfolios.Please check all
investment alerts for Ellington
Ellington Residential Valuation Ratios as Compared to Competition
Our valuation model uses many indicators to compare Ellington value to that of its competitors to determine the firm's financial worth. You can analyze the relationship between different fundamental ratios across Ellington Residential competition to find
correlations between indicators driving the intrinsic value of Ellington.
Ellington Residential Gross Profit
Ellington Residential Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing Ellington Residential previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show Ellington Residential Gross Profit growth over the last 10 years. Please check Ellington Residential's
gross profit and other
fundamental indicators for more details.
A Deeper Perspective
The recent roll up in Ellington Residential short term price appreciation could raise concerns from investors as the firm is trading at a share price of
7.17 on very low momentum in volume. The company executives have successfully maneuvered the firm at convenient times to take advantage of all market conditions in
April. The stock standard deviation of daily returns for 90 days investing horizon is currently 1.47. The below-average Stock volatility is a good sign for longer-term investment options and for buy-and-hold investors.
Margins Breakdown
Ellington profit margins show the degree to which it makes money. Margin indicators are used not only by investors but also by creditors or Ellington Residential itself as indicators of financial health and management effectiveness.
Please look more closely at the different varieties of Ellington Residential profit margins.
| Pretax Profit Margin | 0.33 |
| Operating Profit Margin | 4.02 |
| Net Profit Margin | 0.33 |
| Gross Profit Margin | 0.93 |
Ellington Residential Market Cap is very stable at the moment. Also, Ellington Residential Dividend Yield is very stable at the moment. As the saying goes, "Don't put all your eggs in one basket," and this rings true when considering Ellington Residential (EARN). With a market capitalization of $140.32M and a current valuation of $764.38M, the company's financial health appears robust. However, the company's high probability of bankruptcy at 77.58% and a negative net interest income of $634K suggest potential financial instability. Despite a forward dividend yield of 0.1356 and a five-year return of 12.31%, the company's high debt to equity ratio of 8.04% and a negative skewness of -0.73 indicate potential market adjustment. Therefore, investors should exercise caution and diversify their portfolio to mitigate potential risks..
Ellington is expecting lower volatility in June
Ellington Residential Mortgage's recent Jensen Alpha of 0.37 suggests a positive risk-adjusted performance, indicating the company has generated higher returns than expected for its risk level. However, the company anticipates lower volatility in June, possibly due to stable interest rates or reduced market uncertainty. Lower volatility often equates to less risk, potentially making this stock an attractive investment. Ellington Residential Mortgage's relatively low volatility, with a skewness of -0.73 and kurtosis of 1.52, is noteworthy. Understanding market volatility trends can help investors time the market.
Volatility indicators allow traders to measure Ellington Residential's stock risk against market volatility during bullish and bearish trends. Bear markets' heightened volatility can impact Ellington Residential's stock price, causing investor stress and prompting portfolio rebalancing.In conclusion, the outlook for Ellington Residential (EARN) appears optimistic, with the analyst overall consensus being a 'Buy'. With a valuation market value of
$7.17, there is potential for significant upside as the analyst target price estimated value stands at
$9.13. Despite some analysts holding reservations, with four holds on the stock, the lowest estimated target price still stands at a promising $8.31. Therefore, based on the available data, it is less likely that Ellington Residential will slide back in June. However, investors should always consider the possible downside price of $5.82 when making their decisions..
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Ellen Johnson is a Member of Macroaxis Editorial Board. Ellen covers public companies in North America, focusing primarily on valuation and volatility. Six years of experience in predictive investment analytics and risk management.
View Profile This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Ellen Johnson do not own shares of Ellington Residential Mortgage. Please refer to our
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