Trying to decide what to do with Federal Home Loan Mortgage stock? You are definitely not alone. After all, we are talking about a company whose share price has seen an eye-watering surge of over 900% in just the last year and nearly 2,200% across the past three years. These are numbers you do not see every day. That kind of rapid climb brings both excitement and a healthy dose of caution for investors, especially as volatility has ramped up recently. The stock saw a 9.5% slide in the past week following a jaw-dropping 37.3% monthly gain and an incredible year-to-date return of more than 260%.
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What is driving these wild swings? Recent headlines have shaken up the mortgage industry. Big-name financiers like Bill Ackman have called for a historic merger between Freddie Mac and Fannie Mae. There is also news of a possible IPO that could fetch a combined market value of $500 billion or more. Additionally, there is even talk of incorporating crypto assets into government-backed mortgages. With this whirlwind of news, it is clear why traders are rapidly reevaluating the risks and rewards tied to this stock.
But here is what might really intrigue value-focused investors. By tallying up six key valuation checks, Federal Home Loan Mortgage scores a 4, suggesting it is still undervalued across most metrics. The market may be catching on, but the story is far from over.
Next, we will break down those valuation methods to see where the opportunities and pitfalls may lie. For those looking to level up their analysis, do not miss the deeper approach to valuation we will be revealing at the end of this article.
The Discounted Cash Flow (DCF) model aims to estimate a company’s value by projecting its future free cash flows and discounting them back to today’s value. For Federal Home Loan Mortgage, the analysis uses a 2 Stage Free Cash Flow to Equity approach, factoring in both near-term analyst projections and longer-term extrapolations.
Currently, the company generates a Free Cash Flow (FCF) of $14.5 Billion, with analysts estimating steady growth over the next decade. In 2026, FCF is projected at $17.4 Billion, continuing to climb annually and reaching $32.3 Billion by 2035, according to Simply Wall St’s extended projections. Growth rates in the first five years are based on analyst consensus, while longer-term estimates follow historical trends and industry outlooks. All monetary values are in US dollars ($).
This forward-looking DCF calculation values Federal Home Loan Mortgage at an intrinsic price of $77.14 per share. The DCF model indicates the stock trades at an 84.2% discount to its fair value, which suggests that the shares remain deeply undervalued at present levels.
Our Discounted Cash Flow (DCF) analysis suggests Federal Home Loan Mortgage is undervalued by 84.2%. Track this in your watchlist or portfolio, or discover more undervalued stocks.
The price-to-sales (P/S) ratio is a popular metric for valuing companies like Federal Home Loan Mortgage, especially in the financial sector where profits can fluctuate but revenue streams remain robust and more stable. For established and profitable firms, the P/S ratio helps investors assess valuation without being skewed by one-off expenses or cyclical earnings volatility.
Growth trends and the risk profile of a company play important roles in determining what constitutes a fair P/S multiple. Higher expected sales growth or lower business risks usually justify a higher multiple. Conversely, slower growth or elevated risks can drag the fair ratio lower.
Currently, Federal Home Loan Mortgage trades at a P/S ratio of 1.7x. This is well below both the Diversified Financial industry average of 2.9x and the peer average of 4.4x, indicating a discount in comparison to other major players in the space.
Simply Wall St’s Fair Ratio concept takes this a step further, providing a more nuanced benchmark. Unlike simple relative comparisons, the Fair Ratio reflects considerations such as Federal Home Loan Mortgage’s growth prospects, profit margins, market capitalization, and the broader industry context. This proprietary calculation is designed to deliver a smarter valuation assessment tailored specifically to the company’s profile, offering investors a better decision-making tool than standard peer or industry averages alone.
Based on this deeper methodology, Federal Home Loan Mortgage’s P/S ratio suggests that the stock is UNDERVALUED relative to what the Fair Ratio would expect for a business of its quality, risk, and growth potential.
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is a simple, effective tool that lets you apply your own story or perspective to a company by connecting its past and future numbers with your view of where it is headed. Narratives tie together the “why” behind the numbers, linking a company’s business outlook to financial forecasts and ultimately to a fair value, helping you see past the headlines.
On Simply Wall St’s Community page, used by millions of investors, Narratives make it easy to build and test your own thesis for Federal Home Loan Mortgage. With Narratives, you can directly compare your Fair Value estimate with the current Price, making more confident decisions about when to buy or sell. As business results and news hit the market, these Narratives update dynamically, keeping your analysis up to date automatically.
For example, with Federal Home Loan Mortgage, some investors might project a bold Fair Value after factoring in rapid technological adoption or industry-changing mergers, while others may take a cautious view based on global economic risks. This highlights how Narratives empower everyone to bring their unique perspectives to the table.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
