Annaly Capital Management (NLY): Is There More Value Left After Recent Gains?

Annaly Capital Management (NLY) has seen its stock post a 1% gain over the past week, following steady performance in recent months. Investors are now weighing the potential impact of shifts in the broader interest rate landscape as well as earnings trends.

See our latest analysis for Annaly Capital Management.

Annaly’s 13% year-to-date share price return and 18% total return over the past year reflect a rebound in investor confidence, especially as REITs navigate shifting interest rate expectations. The 87% total return over three years highlights strong long-term reward, despite short-term volatility.

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With a recent run-up in price and strong historical returns, the question now is whether Annaly’s shares remain undervalued or if the market has already priced in the next phase of growth, which could leave little room for further upside.

Most Popular Narrative: 3.2% Undervalued

Compared to Annaly Capital Management’s last closing price of $20.80, the most widely followed narrative estimates a fair value of $21.48, suggesting that shares offer a slight discount right now. As the market weighs recent returns, the reasoning behind this valuation centers on key strategic shifts and their anticipated financial impact.

The business is benefiting from a strategic shift in coupon allocation by positioning in higher coupon segments (6% and 6.5%) within its Agency MBS portfolio. This may enhance the economic return and net margins. Improved financing costs and economic leverage, along with $400 million in accretive common equity raised, have set the stage for increased earnings available for distribution, supporting potential revenue growth and stronger margins in the period ahead.

Read the complete narrative.

What’s really powering this narrative’s optimism? There is a bold growth forecast, ambitious margin expansion, and a future earnings multiple projected to be far below today’s level. The real surprise is in the numbers behind this value. Be sure to review the details that could redefine your outlook.

Result: Fair Value of $21.48 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent market volatility or a reversal in mortgage rates could quickly challenge the current optimism surrounding Annaly’s growth outlook.

Find out about the key risks to this Annaly Capital Management narrative.

Another View: Multiples Suggest a Premium

While our first look finds Annaly trading at a discount to fair value, comparing its price-to-earnings ratio to industry peers shows a very different picture. Annaly’s P/E of 23.2x stands well above the US Mortgage REITs industry average of 12.8x and the peer group’s 17.7x. It is also slightly below its estimated fair ratio of 24.9x, so the market could be anticipating further gains or simply pricing in higher risk. Does this mean Annaly is overvalued by this measure, or is the market onto something others are missing?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Annaly Capital Management Narrative

If you’d like to challenge these findings or take a hands-on approach with the data, you can craft a custom narrative in just minutes, your way. Do it your way

A great starting point for your Annaly Capital Management research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision.

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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.

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