Assessing Freddie Mac (FMCC) Valuation Following a 27% One-Month Surge

Federal Home Loan Mortgage (FMCC) has seen some interesting stock movement recently. Over the past month, the stock has delivered a return of nearly 27 percent, catching the attention of investors looking for value plays in the sector.

See our latest analysis for Federal Home Loan Mortgage.

While Federal Home Loan Mortgage’s recent 27 percent jump over the past month has stood out, the bigger story is momentum building in its multi-year performance. The company has delivered a 1-year total shareholder return close to 10 percent, with three- and five-year total returns also positive. This reflects steady investor interest as market conditions shift and risks get re-evaluated.

If unusual moves like this one have you rethinking your watchlist, it might be the right time to discover fast growing stocks with high insider ownership

This impressive run raises a timely question: is Federal Home Loan Mortgage's stock still undervalued and set for further gains, or are investors already pricing in the company’s potential growth?

Price-to-Sales Ratio of 1.7x: Is it justified?

Federal Home Loan Mortgage is currently trading at a price-to-sales (P/S) ratio of 1.7x. Compared to peers and the industry, this makes the stock appear attractively priced at its last close of $12.39.

The price-to-sales ratio measures how much investors are willing to pay for each dollar of a company’s revenue. It is especially relevant for financial firms like Federal Home Loan Mortgage, where profitability may be volatile, but revenue remains a significant grounding metric.

Looking at the numbers, Federal Home Loan Mortgage's P/S of 1.7x stands well below the US Diversified Financial industry average of 2.9x. It is also further discounted relative to its peers’ average of 4.1x. This discount suggests the market is pricing in uncertainty or risks that may not reflect the company’s actual topline potential. If valuation moves toward the industry or peers, there could be meaningful upside.

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

Result: Price-to-Sales of 1.7x (UNDERVALUED)

However, risks remain, including the company’s recent net loss and analyst targets below the current share price. These factors could limit near-term upside.

Find out about the key risks to this Federal Home Loan Mortgage narrative.

Another View: What Does Our DCF Model Say?

While the price-to-sales ratio presents Federal Home Loan Mortgage as undervalued, our DCF model indicates a much bigger disconnect. The SWS DCF model estimates fair value at $77.14, which is far above the current price. This may suggest an overlooked opportunity, or it could indicate there are risks the market perceives that the model does not capture.

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Federal Home Loan Mortgage for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Federal Home Loan Mortgage Narrative

If you want to dig deeper or have your own perspective, you can easily explore the numbers yourself and shape your own story in just a few minutes. Do it your way.

A great starting point for your Federal Home Loan Mortgage research is our analysis highlighting 1 key reward and 2 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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