Assessing Annaly Capital Management (NLY) Valuation After Index Exit and PennyMac Partnership

Annaly Capital Management (NLY) was recently removed from the FTSE All-World Index, a shift that could influence passive investor flows. Around the same time, the company announced a new servicing partnership with PennyMac.

See our latest analysis for Annaly Capital Management.

Annaly’s recent removal from the FTSE All-World Index, combined with its new partnership with PennyMac, comes at a time when market sentiment around financials has been clouded by shaky consumer confidence and broader economic uncertainty. While last year’s total shareholder return of 21.7% signals the company has rewarded long-haul investors, momentum has moderated more recently as the market weighs both sector risks and Annaly’s new initiatives.

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The question now is whether Annaly’s recent share price reflects uncertainty and potential future growth, or if investors have a rare opportunity to buy at a discount before momentum returns.

Most Popular Narrative: 2.1% Undervalued

With Annaly Capital Management’s fair value pegged at $21.20, just above the recent close of $20.76, the narrative points to a stock that remains slightly discounted by market participants. This small gap raises questions about whether current pricing fully reflects bullish growth assumptions that underpin the prevailing outlook.

Annaly Capital Management is well positioned within its MSR business due to the lower profitability of mortgage lenders, which leads to a need to quickly offload MSRs. This could enhance revenue by acquiring MSR at attractive rates as originators seek liquidity.

Read the complete narrative.

Want to know what’s really driving this price? The narrative’s math hinges on aggressive expansion in key income streams and bold future margin projections that challenge industry norms. Can these optimistic financial bets stand up? See the projections underlying this tight valuation spread inside the full narrative.

Result: Fair Value of $21.20 (UNDERVALUED)

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

However, persistent interest rate volatility and mounting competition in the mortgage market could quickly challenge Annaly’s optimistic outlook and affect future returns.

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

Another View: Peer Comparisons Paint a Different Picture

From a peer comparison perspective, Annaly Capital Management appears expensive. Its current price-to-earnings ratio is 23.2x, which is notably higher than the US Mortgage REITs industry average of 13.5x and above its sector peers at 17.8x. While markets can push stocks beyond averages, this premium suggests increased valuation risk if growth stalls. Will investors continue to pay up for Annaly, or will prices adjust back closer to the fair ratio of 26.1x?

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

Build Your Own Annaly Capital Management Narrative

If you think there’s more beneath the surface or want to form your own perspective, you can build a fresh narrative yourself in just minutes. 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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