Ellington Financial (EFC) AI Stock Analysis

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Ellington Financial

(NYSE:EFC)

Rating:65Neutral

Price Target:―

Ellington Financial's overall stock score is 65, reflecting a mixed financial performance with significant concerns about revenue generation and cash flow consistency. However, the company's strong earnings call performance and attractive valuation partially offset these concerns. Technical indicators provide no clear directional signal, suggesting caution. The high dividend yield is a key attraction, but operational challenges, especially in the commercial mortgage sector, remain a risk.

Positive Factors

Dividend Yield

EFC's dividend yield is expected to be 12.1%, with stock price appreciation leading to a 12-month total return of about 28%.

Risk Management

EFC has a best-in-class track record of preserving book value, especially in downturns and dislocations.

Negative Factors

Book Value

4Q24 BV down 1.0%.

Earnings Estimate

The reported book value per share decreased, leading to a lowered EPS estimate for 2025.

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

Market Cap

$1.23B

Dividend Yield11.96%

Average Volume (3M)969.16K

Price to Earnings (P/E)9.4

Beta (1Y)0.61

Revenue Growth11.91%

EPS Growth52.26%

CountryUS

Employees400

SectorReal Estate

Sector Strength56

IndustryREIT - Mortgage

Share Statistics

EPS (TTM)0.39

Shares Outstanding94,513,140

10 Day Avg. Volume872,388

30 Day Avg. Volume969,163

Financial Highlights & Ratios

PEG Ratio-2.46

Price to Book (P/B)0.75

Price to Sales (P/S)0.00

P/FCF Ratio-3.38

Enterprise Value/Market Cap0.84

Enterprise Value/Revenue0.90

Enterprise Value/Gross Profit3.64

Enterprise Value/Ebitda8.72

Forecast

1Y Price Target

$14.20

Price Target Upside12.70% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering6

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 picture. While there's been a historical strength in gross profit margin and an improvement in net profit margin in 2023, the complete drop in revenue in 2024 is concerning. The balance sheet shows improved leverage, but cash flows are inconsistent with negative operational cash flow in 2023 and zero in 2024, indicating potential challenges in sustaining operations long-term.

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.

TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
284.66M	282.19M	256.50M	43.15M	121.96M	31.26M
	Gross Profit
284.66M	282.19M	251.79M	23.55M	79.62M	5.50M
	EBIT
115.31M	116.27M	130.57M	114.46M	136.61M	36.39M
	EBITDA
0.00	0.00	0.00	0.00	0.00	0.00
	Net Income Common Stockholders
150.98M	145.86M	84.08M	-7.25M	82.45M	-9.56M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
203.29M	0.00	230.54M	217.05M	92.66M	111.65M
	Total Assets
16.64B	16.32B	15.32B	14.09B	5.18B	3.41B
	Total Debt
0.00	0.00	13.33B	12.40B	3.64B	2.39B
	Net Debt
-203.29M	-192.39M	13.10B	12.19B	3.54B	2.28B
	Total Liabilities
15.01B	14.73B	13.78B	12.87B	3.85B	2.49B
	Stockholders Equity
1.61B	1.57B	1.52B	1.20B	1.29B	885.22M
Cash Flow		Free Cash Flow
-497.46M	-430.53M	-241.86M	3.58M	224.13M	150.15M
	Operating Cash Flow
-497.46M	-430.53M	-241.86M	42.69M	51.29M	119.51M
	Investing Cash Flow
-1.76B	-728.26M	174.91M	-1.75B	-2.03B	507.27M
	Financing Cash Flow
2.28B	1.14B	75.63M	1.84B	1.95B	-587.43M

Ellington Financial Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price12.60

Price Trends

50DMA

12.73

Negative

100DMA

12.54

Positive

200DMA

12.15

Positive

Market Momentum

MACD

0.11

Positive

RSI

43.73

Neutral

STOCH

37.98

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For EFC, the sentiment is Neutral. The current price of 12.6 is below the 20-day moving average (MA) of 12.96, below the 50-day MA of 12.73, and above the 200-day MA of 12.15, indicating a neutral trend. The MACD of 0.11 indicates Positive momentum. The RSI at 43.73 is Neutral, neither overbought nor oversold. The STOCH value of 37.98 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral 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 3 New Risks

There are risks and conflicts of interest associated with the base management fee we are obligated to pay our Manager. Q4, 2024

We may experience significant fluctuations in our book value per share and quarterly operating results. Q4, 2024

We invest in corporate loans and CLOs backed by corporate loans, which exposes us to certain risks. Q4, 2024

Ellington Financial Peers Comparison

Overall Rating

UnderperformOutperform

Sector (60)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
ARI	66 Neutral	$1.37B	―	0.41%	11.19%	-14.98%	95.53%
EFC	65 Neutral	$1.23B	9.45	9.59%	11.96%	11.91%	52.26%
Sector *	60 Neutral	$2.82B	10.38	0.33%	8508.19%	5.98%	-17.49%
DX	60 Neutral	$1.34B	16.14	6.01%	13.44%	73.74%	-34.10%
TWO	53 Neutral	$1.24B	5.06	0.63%	15.15%	-18.22%	-114.40%
PMT	50 Neutral	$1.12B	13.86	6.36%	12.39%	-4.42%	-43.99%
ARR	48 Neutral	$1.37B	8.01	-0.11%	17.22%	142.18%	50.74%

* Real Estate Sector Average

Performance Comparison

EFC

Ellington Financial

12.60

1.95

18.31%

ARI

Apollo Real Estate

9.54

0.32

3.47%

ARR

ARMOUR Residential REIT

15.95

-0.33

-2.03%

Dynex Capital

12.03

1.18

10.88%

TWO

Two Harbors

11.33

0.39

3.56%

PMT

PennyMac Mortgage

12.40

0.16

1.31%

Ellington Financial Earnings Call Summary

Earnings Call Date:May 07, 2025

(Q1-2025)

% Change Since: -1.41%|

Next Earnings Date:Aug 06, 2025

Earnings Call Sentiment Positive

The earnings call reflects a strong start to 2025, with Ellington Financial maintaining dividend coverage and successfully executing securitization deals. Despite some challenges in the Longbridge segment due to interest rate hedge losses and seasonal declines, the overall performance was positive with strong contributions from loan affiliates and securitization activities. The company is well-positioned for future opportunities amidst market volatility.

Q1-2025 Updates

Positive Updates

Solid First Quarter Performance

Ellington Financial reported a GAAP net income of $0.35 per share and adjusted distributable earnings of $0.39 per share, continuing to cover dividends.

Successful Securitization Activity

Five new securitization deals were priced in the first quarter, securing long-term, non mark-to-market financing at attractive terms, and expanding the portfolio of high-yielding retained tranches.

Low Recourse Leverage

Maintained a low recourse leverage at 1.7:1, slightly lower than the year-end level of 1.8:1, due to significant securitization activity and opportunistic asset sales.

Positive Contribution from Loan Originator Affiliates

Non-QM originator affiliates, such as LendSure and American Heritage, provided a strong flow of products and profitability, contributing nicely to the bottom-line.

Progress in Commercial Mortgage Workouts

Notable progress was made on commercial mortgage workouts, with significant resolutions reducing negative carry assets and freeing up capital.

Increase in Credit Hedges

Built up credit hedges considerably, with corporate credit hedges alone representing a short position of over $450 million in high yield corporate bonds.

Negative Updates

Longbridge Segment Losses

Longbridge segment reported a slight net loss due to interest rate hedges, despite positive contributions from servicing and originations.

Interest Rate Hedge Losses

With interest rates sharply lower over the quarter, losses on interest rate hedges led to slightly negative GAAP net income overall for the Longbridge segment.

Seasonal Decline in HECM Origination Volumes

HECM origination volumes at Longbridge declined sequentially due to seasonality, affecting the segment's overall performance.

Volatile April Market Conditions

April experienced significant market volatility, challenging many business models and causing a huge amount of volatility in both high yield bonds and bank loans.

Company Guidance

During the Ellington Financial First Quarter 2025 Earnings Conference Call, the company provided guidance on several key metrics. They reported a GAAP net income of $0.35 per share and adjusted distributable earnings (ADE) of $0.39 per share, which covered their dividends. The company's recourse leverage decreased to 1.7:1 from the previous year-end level of 1.8:1, with their total long Agency RMBS portfolio declining by 14% to $256 million. Book value per common share was reported at $13.44, and the total economic return for the first quarter was 9.5% annualized. Ellington Financial highlighted that, despite market volatility, their diversified portfolio and strategic moves like securitizations and asset sales positioned them well for ongoing growth. They also mentioned the addition of two new loan financing facilities and a 31% increase in their Longbridge portfolio, driven by proprietary reverse mortgage loan originations.

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.