Federal Home Loan Mortgage has seen its stock swing sharply in recent years, which raises a simple question for you as an investor. Is the current share price around its recent US$3.91 close adequately supported by the sales the business generates today.
- Over the past 3 years the stock has delivered a very large gain of about 7x. Anyone looking at Federal Home Loan Mortgage now needs to think hard about how that move lines up with its sales base.
- Renewed debate about privatizing Freddie Mac, including high profile commentary from investors such as Bill Ackman, can reset expectations for future revenue growth and capital needs if the company eventually leaves federal conservatorship.
- The analysts covering Federal Home Loan Mortgage have run their own numbers. See what analysts think Federal Home Loan Mortgage's shares could be worth.
The issue now is whether Federal Home Loan Mortgage's current market value is justified by its sales performance and the revenue profile investors expect from here.
If you want to further explore this same sales-based valuation question beyond Federal Home Loan Mortgage, take a look at 35 high quality undervalued stocks.
Does Federal Home Loan Mortgage Look Undervalued on Sales?
The P/S ratio suits Federal Home Loan Mortgage because revenue is a cleaner anchor than earnings for a housing finance giant in conservatorship. On current figures, the stock trades at a P/S of about 0.5x. That compares with roughly 2.3x for the wider Diversified Financial industry and about 3.7x across closer peers, so the market is attaching a much lower price tag to each dollar of Freddie Mac’s sales.
The fair-value framework, which adjusts for the company’s own risk profile, margins and scale, also points to a higher P/S than the one investors are paying today, so the shares screen undervalued on this metric. Because renewed talk of privatization and Bill Ackman’s bullish comments have lifted attention on Freddie Mac, yet the P/S still sits well below both industry and peer levels, the current label the market is putting on its revenue base looks cautious. Explore the numbers behind Federal Home Loan Mortgage's P/S valuation.
The Federal Home Loan Mortgage Narrative: What Would Justify Today's Price?
Simply Wall St Narratives for Federal Home Loan Mortgage pick up where the valuation puzzle leaves off. Narratives spell out the specific paths for growth, margins and earnings that would need to play out for Federal Home Loan Mortgage's stock to be worth materially more or materially less than it trades for today. Each one links its number to a clear view on how growth, profitability and risk might evolve so you can revisit the logic as fresh information appears on the Community page.
One of the top narratives on Federal Home Loan Mortgage: 73% undervalued
This Narrative is the analyst consensus Narrative on Simply Wall St, which compiles analysts' consensus price target and revenue and earnings forecasts, not one person's view.
"High credit quality in the single family book, with a weighted average current loan to value ratio of 53%, an average credit score of 753 and serious delinquencies at 60 basis points…"
Discover why this Narrative puts Federal Home Loan Mortgage at 73% undervalued.
Federal Home Loan Mortgage has one more check investors should see
Price comparisons only tell part of the story, and Federal Home Loan Mortgage also has specific risk checks our research has flagged that you may want to weigh before building a thesis. Take a closer look at 3 warning signs (2 major) before settling on a valuation.
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