Ellington Financial (EFC) AI Stock Analysis

1,878 Followers

Top Page

Ellington Financial

(NYSE:EFC)

68Neutral

Ellington Financial's overall stock score is 68, reflecting a mixed but cautiously optimistic outlook. The most significant factor is the financial performance, where concerns about revenue volatility and cash flow instability weigh heavily. However, technical analysis shows strong momentum, and valuation metrics indicate potential upside with an attractive dividend yield. The earnings call and corporate events highlight strategic strengths and growth opportunities, slightly offset by sector-specific challenges.

Positive Factors

Dividend Sustainability

EFC's core earnings cover the $0.39 quarterly dividend, suggesting sustainability.

Risk Management

EFC is considered to have best-in-class risk management, which should place it in the highest valuation band among peers.

Stock Valuation

EFC shares trade at a discount compared to peers, indicating potential for appreciation.

Negative Factors

Book Value Decline

3Q24 book value (BV) down 1.9% from $13.92 as of 6/30/24, impacting the earnings per share estimate.

Earnings Estimate Reduction

EFC reported 3Q24 book value (BV) of $13.66, implying 3Q24 EPS of $0.12 versus the 3Q24 quarterly dividend of $0.39, leading to a lowering of 3Q24 and 2024 EPS estimates.

Earnings Performance

EFC reported 4Q24 book value (BV) of $13.52, implying 4Q24 EPS of $0.25 below previous $0.39 EPS estimate.

Ellington Financial (EFC) vs. S&P 500 (SPY)

Market Cap

$1.13B

Dividend Yield12.55%

Average Volume (3M)1.31M

Price to Earnings (P/E)9.3

Beta (1Y)0.76

Revenue Growth11.91%

EPS Growth52.26%

CountryUS

Employees400

SectorReal Estate

Sector Strength79

IndustryREIT - Mortgage

Share Statistics

EPS (TTM)1.35

Shares Outstanding90,678,490

10 Day Avg. Volume998,172

30 Day Avg. Volume1,310,123

Financial Highlights & Ratios

PEG Ratio0.18

Price to Book (P/B)N/A

Price to Sales (P/S)4.07

Price to Cash Flow (P/CF)-2.10

P/FCF Ratio0.00

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$14.50

Price Target Upside16.65% Upside

Rating ConsensusStrong Buy

Number of Analyst Covering5

Ellington Financial Business Overview & Revenue Model

Company DescriptionEllington Financial Inc., through its subsidiary, Ellington Financial Operating Partnership LLC, acquires and manages mortgage-related, consumer-related, corporate-related, and other financial assets in the United States. The company acquires and manages residential mortgage-backed securities (RMBS) backed by prime jumbo, Alt-A, manufactured housing, and subprime residential mortgage loans; RMBS for which the principal and interest payments are guaranteed by the U.S. government agency or the U.S. government-sponsored entity; residential mortgage loans; commercial mortgage-backed securities; and commercial mortgage loans and other commercial real estate debt. It also provides collateralized loan obligations; mortgage-related and non-mortgage-related derivatives; corporate debt and equity securities; corporate loans; and other strategic investments. In addition, the company offers consumer loans and asset-backed securities backed by consumer and commercial assets. Ellington Financial LLC was incorporated in 2007 and is based in Old Greenwich, Connecticut.

How the Company Makes MoneyEllington Financial makes money primarily through the interest income generated from its portfolio of financial assets, including mortgage-backed and asset-backed securities. The company invests in both agency and non-agency securities, with a focus on optimizing the yield and risk profile of its portfolio. Additionally, Ellington Financial engages in trading and hedging activities to manage interest rate and credit risks, which can also contribute to its revenue. The company's earnings are further supported by its ability to leverage its assets, amplifying returns on equity. Key partnerships with financial institutions and access to capital markets are crucial factors that enable Ellington Financial to effectively manage and grow its investment portfolio.

Ellington Financial Financial Statement Overview

Summary

Ellington Financial shows a mixed financial position, with concerning volatility in revenue, notably a complete drop in 2024. Despite a strong gross profit margin and improved net profit margin in 2023, the inconsistency in EBIT and cash flows highlight operational challenges. The balance sheet reflects improved leverage and equity growth, but the instability in operating cash flows and reliance on external funding are concerns.

Income Statement

Neutral

Ellington Financial has shown fluctuating revenue with a significant increase in 2023 followed by a complete drop in 2024. The gross profit margin has been strong historically, and the net profit margin improved in 2023. However, the complete lack of revenue reported in 2024 is concerning for long-term stability. EBIT has been inconsistent, indicating potential operational challenges.

Balance Sheet

Positive

The company maintains a solid equity base, with stockholders' equity growing over time. The debt-to-equity ratio was high in 2023 but improved significantly by 2024 due to the reduction in total debt. The equity ratio remains stable, suggesting a balanced approach to leverage. However, the drastic drop in total revenue raises questions about asset utilization efficiency.

Cash Flow

Neutral

Ellington Financial's cash flow from operations has been volatile, with negative cash flow in 2023 and zero in 2024. The financing cash flow has been positive, indicating reliance on external funding. Free cash flow has been inconsistent, which could impact the company's ability to reinvest in growth initiatives. The absence of free cash flow growth in 2024 is a concern.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
282.19M	256.50M	43.15M	121.96M	31.26M
	Gross Profit
282.19M	251.79M	23.55M	79.62M	5.50M
	EBIT
-789.06M	130.57M	114.46M	136.61M	36.39M
	EBITDA
0.00	0.00	0.00	0.00	0.00
	Net Income Common Stockholders
118.97M	84.08M	-7.25M	82.45M	-9.56M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
192.39M	230.54M	217.05M	92.66M	111.65M
	Total Assets
16.32B	15.32B	14.09B	5.18B	3.41B
	Total Debt
0.00	13.33B	12.40B	3.64B	2.39B
	Net Debt
-192.39M	13.10B	12.19B	3.54B	2.28B
	Total Liabilities
14.73B	13.78B	12.87B	3.85B	2.49B
	Stockholders Equity
1.57B	1.52B	1.20B	1.29B	885.22M
Cash Flow		Free Cash Flow
-430.53M	-241.86M	3.58M	224.13M	150.15M
	Operating Cash Flow
-430.53M	-241.86M	42.69M	51.29M	119.51M
	Investing Cash Flow
-728.26M	174.91M	-1.75B	-2.03B	507.27M
	Financing Cash Flow
1.14B	75.63M	1.84B	1.95B	-587.43M

Ellington Financial Technical Analysis

Technical Analysis Sentiment

Negative

Last Price12.43

Price Trends

50DMA

12.91

Negative

100DMA

12.36

Negative

200DMA

12.07

Negative

Market Momentum

MACD

0.08

Positive

RSI

54.08

Neutral

STOCH

34.07

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For EFC, the sentiment is Negative. The current price of 12.43 is below the 20-day moving average (MA) of 13.08, below the 50-day MA of 12.91, and above the 200-day MA of 12.07, indicating a bearish trend. The MACD of 0.08 indicates Positive momentum. The RSI at 54.08 is Neutral, neither overbought nor oversold. The STOCH value of 34.07 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for EFC.

Ellington Financial Risk Analysis

Ellington Financial disclosed 124 risk factors in its most recent earnings report. Ellington Financial reported the most risks in the “Finance & Corporate” category.

Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy

Latest Risks Added 0 New Risks

Ellington Financial Peers Comparison

Overall Rating

UnderperformOutperform

Sector (61)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
AGNC	69 Neutral	$8.22B	9.66	9.58%	16.04%	384.69%	963700.00%
EFC	68 Neutral	$1.13B	9.25	9.45%	12.55%	11.91%	52.26%
NLY	68 Neutral	$11.25B	11.62	8.40%	14.07%	13.33%	―
CIM	63 Neutral	$950.03M	10.68	6.92%	12.44%	7.13%	64.82%
TWO	62 Neutral	$1.20B	4.87	13.74%	15.60%	28.33%	―
Sector *	61 Neutral	$4.43B	16.13	-3.23%	11.37%	6.25%	-21.19%
MFA	60 Neutral	$982.18M	11.72	6.35%	14.72%	26.34%	79.07%

* Real Estate Sector Average

Performance Comparison

EFC

Ellington Financial

11.77

1.65

16.30%

AGNC

AGNC Investment

8.66

0.29

3.46%

NLY

Annaly Capital

18.13

1.26

7.47%

CIM

Chimera Investment

10.91

-0.72

-6.19%

MFA

MFA Financial

8.93

-0.82

-8.41%

TWO

Two Harbors

11.03

0.24

2.22%

Ellington Financial Earnings Call Summary

Earnings Call Date: Feb 27, 2025 | % Change Since: -4.68% | Next Earnings Date: May 7, 2025

Earnings Call Sentiment Positive

Ellington Financial delivered strong performance in Q4 and 2024, with significant growth in its loan and securitization portfolios, improved financing costs, and notable success in the Longbridge segment. However, challenges in the commercial mortgage sector and rising non-QM delinquencies present areas of concern. Overall, the positive achievements slightly outweigh the negative issues.

Highlights

Strong Q4 and 2024 Performance

Ellington Financial reported net income of $0.25 per share and adjusted distributable earnings of $0.45 per share in Q4, comfortably covering quarterly dividends. The year was capped with a 25% growth in the credit portfolio and strong performance from Longbridge.

Loan Portfolio and Securitization Growth

The company's credit portfolio grew by 39% in the fourth quarter, with significant contributions from proprietary reverse mortgages and commercial mortgage bridge loans. Four securitizations were completed in Q4, marking a new high in activity for the company.

Improved Financing and Cost Management

Ellington Financial strengthened its liability side by executing securitizations, improving warehouse lines, and redeeming high-cost debt. The total weighted average borrowing rate on recourse borrowings decreased by 56 basis points to 6.21%.

Longbridge Segment Success

The Longbridge segment saw a significant increase in originations, with volumes up 18% sequentially, contributing to a strong financial performance.

Lowlights

Commercial Mortgage Challenges

Ellington Financial is resolving three significant loans in default, with ongoing challenges in the commercial mortgage sector.

Rising Non-QM Delinquencies

There was an uptick in residential loan delinquencies, particularly in the non-QM portfolio, attributed to larger loan sizes and higher mortgage rates.

Agency Strategy Underperformance

The agency strategy experienced a modest loss due to rising interest rates and volatility, impacting the overall financial results.

Company Guidance

During the Ellington Financial Fourth Quarter 2024 Earnings Conference Call, the company reported strong financial performance, with net income at $0.25 per share and adjusted distributable earnings (ADE) rising by $0.05 sequentially to $0.45 per share, covering the quarterly dividend of $0.39 per share. The company's credit portfolio grew by 39%, driven by expansions in their HELOC, proprietary reverse, and commercial mortgage bridge loans. They completed four securitizations, including two non-QM deals and their first closed-end second lien loan securitization, capitalizing on tight securitization spreads. Ellington also reduced its borrowing costs, with a 56 basis point decrease in the weighted average borrowing rate and an unchanged recourse debt-to-equity ratio of 1.8 to 1. Book value per share stood at $13.52, and the total economic return for the quarter was 1.8%. The company emphasized its strategic use of securitizations and diversification across asset types and credit hedges as core competitive advantages.

Ellington Financial Corporate Events

Private Placements and FinancingBusiness Operations and StrategyFinancial Disclosures

Ellington Financial Reports Strong Q4 2024 Results

Positive

Feb 28, 2025

Ellington Financial Inc. reported its fourth-quarter 2024 results, highlighting a net income of $22.4 million attributable to common stockholders. The company experienced strong performance from its loan originator affiliates, particularly in its reverse mortgage loan platform, Longbridge Financial. The quarter saw a 39% growth in mortgage loan portfolios and successful securitization transactions, which contributed to gains and secured financing. The company also improved its liability management by refinancing higher-cost debt and preferred stock, which positively impacted earnings. Despite challenges in the Agency RMBS portfolio due to rising interest rates, the overall performance was bolstered by gains in the credit strategy and Longbridge segment.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.