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Ellington Residential Mortgage (EARN)
NYSE:EARN
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Ellington Residential Mortgage
(NYSE:EARN)
56Neutral
Ellington Residential Mortgage (EARN) vs. S&P 500 (SPY)
Market Cap
$178.56M
Dividend Yield15.69%
Average Volume (3M)759.02K
Price to Earnings (P/E)5.6
Beta (1Y)0.98
Revenue Growth727.90%
EPS Growth191.40%
CountryUS
EmployeesN/A
SectorReal Estate
Sector Strength72
IndustryREITs
Share Statistics
EPS (TTM)1.12
Shares Outstanding29,176,598
10 Day Avg. Volume717,720
30 Day Avg. Volume759,025
Financial Highlights & Ratios
PEG Ratio0.03
Price to Book (P/B)N/A
Price to Sales (P/S)N/A
Price to Cash Flow (P/CF)14.10
P/FCF Ratio4.40
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$8.00Price Target Upside30.93% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering0
Ellington Residential Mortgage Business Overview & Revenue Model
Company DescriptionEllington Residential Mortgage REIT operates as a real estate investment trust, which engages in the acquisition, investment, and management of residential mortgage and real estate-related assets. It manages a portfolio, which consists of non-agency and agency residential mortgage-backed securities; and acquires other target assets, such as residential whole mortgage loans, commercial mortgage-backed securities, mortgage-related derivatives, and other asset-backed securities. The company was founded on August 1, 2012 and is headquartered in Old Greenwich, CT.
How the Company Makes MoneyEllington Residential Mortgage makes money primarily through the interest income it earns on its portfolio of mortgage-backed securities. The company invests in agency RMBS, which are backed by the U.S. government, and seeks to generate returns by managing the spread between the yield on its assets and the cost of its borrowings. EARN may also employ hedging strategies to manage interest rate risk and enhance its risk-adjusted returns. The company's revenue is influenced by factors such as changes in interest rates, mortgage prepayment rates, and the overall health of the housing market. Additionally, EARN's performance can be affected by its strategic partnerships with financial institutions that provide financing and other services to support its investment activities.
Ellington Residential Mortgage Financial Statement Overview
Summary
Ellington Residential Mortgage has shown improvements in revenue and debt management in the TTM period. While recent profitability and leverage metrics appear strong, historical volatility in revenue, profitability, and cash flow raises concerns. Continued focus on stabilizing revenue streams and maintaining current debt levels will be crucial for sustainable financial health.Income Statement
Ellington Residential Mortgage's TTM revenue has improved significantly from the previous year, showing a positive turnaround. However, historical revenue volatility is a concern. The TTM gross profit and net income margins are strong but were preceded by negative margins in prior years, indicating unstable profitability. The lack of consistent revenue growth and fluctuating EBIT margins impact the overall income statement score.30
Negative
Balance Sheet
The company's balance sheet is relatively stable with a significant reduction in total debt to zero in the TTM period, improving the debt-to-equity ratio. The equity ratio has also improved, indicating better asset financing through equity. However, historical leverage was high, which raises concerns about past financial stability. The current positive trend suggests a more stable financial position moving forward.60
Neutral
Cash Flow
The cash flow statement shows positive operating cash flow in the TTM period, reversing from negative cash flow previously. However, free cash flow remains low, limiting flexibility in reinvestment opportunities. Operating cash flow to net income ratio is a positive indicator, but past volatility in cash flows suggests future risks. Overall, cash flow management shows improvement but remains a concern.50
Neutral
| Breakdown | |||||
| TTM | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 | Dec 2019 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 14.17M | -65.00K | 20.19M | -557.00K | 25.94M | 27.54M | Gross Profit |
| 11.97M | -65.00K | 18.75M | -1.87M | 24.64M | 26.24M | EBIT |
| 44.46M | -4.12M | -15.38M | -6.31M | 20.11M | 22.26M | EBITDA |
| 47.67M | 49.81M | 17.93M | 23.39M | 14.82M | 0.00 | Net Income Common Stockholders |
| 21.03M | 4.56M | -30.20M | -6.31M | 20.11M | 22.26M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 18.59M | 38.53M | 34.82M | 69.03M | 58.17M | 35.35M | Total Assets |
| 1.68B | 945.69M | 1.05B | 1.60B | 1.19B | 1.49B | Total Debt |
| 1.50B | 729.54M | 842.46M | 1.06B | 1.02B | 1.30B | Net Debt |
| 1.48B | -38.53M | 807.64M | 995.81M | 957.08M | 1.26B | Total Liabilities |
| 1.52B | 809.45M | 941.22M | 2.84M | 1.53M | 3.76M | Stockholders Equity |
| 153.82M | 136.24M | 112.41M | 154.22M | 166.40M | 160.84M |
| Cash Flow | Free Cash Flow | ||||
| 2.43M | -10.02M | 22.42M | 27.88M | 24.37M | 17.53M | Operating Cash Flow |
| 2.43M | -10.02M | 22.42M | 27.88M | 24.37M | 17.53M | Investing Cash Flow |
| 225.62M | 85.72M | 110.55M | -15.23M | 304.06M | 221.85M | Financing Cash Flow |
| -242.30M | -71.98M | -167.18M | -1.79M | -305.61M | -222.62M |
Ellington Residential Mortgage Technical Analysis
Negative
6.11
Price Trends
6.42
Negative
6.40
Negative
6.38
Negative
Market Momentum
-0.06
Positive
27.62
Positive
11.86
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For EARN, the sentiment is Negative. The current price of 6.11 is below the 20-day moving average (MA) of 6.39, below the 50-day MA of 6.42, and below the 200-day MA of 6.38, indicating a bearish trend. The MACD of -0.06 indicates Positive momentum. The RSI at 27.62 is Positive, neither overbought nor oversold. The STOCH value of 11.86 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for EARN.
Ellington Residential Mortgage Risk Analysis
Ellington Residential Mortgage disclosed 108 risk factors in its most recent earnings report. Ellington Residential Mortgage 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 Residential Mortgage Peers Comparison
Overall Rating
UnderperformOutperform
Sector (61)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
69 Neutral | $9.17B | 11.00 | 9.58% | 14.37% | 384.69% | 963700.00% | |
68 Neutral | $12.13B | 13.37 | 8.40% | 12.40% | 13.33% | ― | |
62 Neutral | $1.39B | 5.64 | 13.74% | 13.46% | 28.33% | ― | |
61 Neutral | $4.76B | 18.86 | -2.89% | 8.05% | 6.45% | -20.33% | |
59 Neutral | $1.09B | 13.05 | 6.35% | 13.12% | 26.34% | 79.07% | |
56 Neutral | $178.56M | 5.64 | 13.88% | 15.69% | 727.90% | 191.40% | |
52 Neutral | $1.41B | 8.01 | -1.09% | 15.58% | -46.65% | 76.86% |
* Real Estate Sector Average
Performance Comparison
EARN
Ellington Residential Mortgage
6.11
0.60
10.89%
AGNC
AGNC Investment
10.09
1.58
18.57%
NLY
Annaly Capital
21.17
3.75
21.53%
ARR
ARMOUR Residential REIT
18.57
1.48
8.66%
MFA
MFA Financial
10.68
0.60
5.95%
TWO
Two Harbors
13.40
2.12
18.79%
Ellington Residential Mortgage Earnings Call Summary
Earnings Call Date: Mar 12, 2025 | % Change Since: 0.00% | Next Earnings Date: May 7, 2025
Earnings Call Sentiment Positive
The earnings call reflects a positive sentiment with strong performance in the CLO portfolio, a significant increase in net interest margin, and positive economic returns. However, challenges remain with the need for additional shareholder votes and the dilution from the ATM offering, which are areas of concern.Highlights
Strong Shareholder Support for Transformation
The conversion-related proposals have approval rates above 92% and over 95% excluding abstentions, showing strong shareholder support.
CLO Portfolio Performance
The CLO debt portfolio had another excellent quarter with tightened credit spreads and opportunistic trading enhancing returns. The CLO equity portfolio also performed well, supported by opportunistic trading and refinancing.
Economic Return
EARN's overall annualized economic return for the third quarter was 10.8%.
Improved Net Interest Margin
Overall net interest margin increased to 5.22% from 4.24% in the prior quarter.
Capital Allocation to CLOs
Capital allocation to CLOs increased to 58% at September 30 from 45% at June 30.
Lowlights
Shareholder Vote Shortfall
The company is still short of the required votes by over 2 million votes to pass certain proposals related to the strategic transformation.
Dividend Concerns
Despite strong performance, there is a focus on maintaining dividend support amid lower leverage and ongoing transformation.
Dilution from ATM Offering
The ATM offering during the quarter resulted in $0.04 of dilution.
Company Guidance
During the Ellington Credit Company Q3 2024 earnings call, significant guidance was provided regarding the company's strategic transformation and financial performance. Laurence Penn highlighted the strong shareholder support for converting EARN to a Delaware closed-end fund, with over 92% of votes favoring the conversion-related proposals. However, they still need 2 million additional votes to meet the threshold required for two of the proposals. The company reported a 10.8% annualized economic return, driven by robust performance in their CLO debt portfolio and a solid net interest margin of 5.22%. The debt-to-equity ratio improved to 2.5:1, and cash plus unencumbered assets stood at $121.5 million. Net income was $0.21 per share, and adjusted distributable earnings were $0.28 per share, covering the dividends despite a reduction in leverage. The management emphasized the potential benefits of the strategic transformation, including better projected risk-adjusted returns and enhanced access to capital markets.Ellington Residential Mortgage Corporate Events
Shareholder MeetingsBusiness Operations and Strategy
Ellington Residential Mortgage Plans Strategic Conversion for 2025
Neutral
Dec 9, 2024
Ellington Credit Company is gearing up for a special shareholder meeting in early 2025 to vote on its conversion to a closed-end fund, aiming to boost its corporate CLO investments. To ensure sufficient votes for the conversion, the company has issued Series A Preferred Shares with 25,000 votes each that mirror common shareholder votes, thus amplifying the existing voting power without altering shareholder intent. This strategic move increases the likelihood of conversion approval, aligning with the company’s transformation strategy to focus on CLO investments.
DividendsBusiness Operations and StrategyFinancial Disclosures
Ellington Residential Mortgage Achieves Strong Q3 Performance
Positive
Nov 13, 2024
Ellington Credit Company reported a net income of $5.4 million in Q3 2024, highlighting strong performance in its CLO debt and equity portfolios. The company saw significant growth in its CLO portfolio, increasing to $144.5 million, and maintained a healthy dividend yield of 14.5%. As it transitions to focus on corporate CLOs, Ellington is well-positioned to capitalize on market inefficiencies, aiming to enhance shareholder value through strategic trading and refinancings.
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.