Did Freddie Mac's 735% Surge Reflect Its Real Value in 2025?

If you have been tracking Federal Home Loan Mortgage lately, chances are you are either feeling an exhilarating rush or eyeing the stock a little warily. It is hard to ignore that this company has a story to tell, with a return of over 735% in the past year alone. That eye-watering 237% year-to-date gain has certainly turned some heads. But not all the recent moves have been to the upside. The stock is up a robust 15.8% in the last week, but if you zoom out to the past month, it retraced by 10.4%. These swings have more to them than just market mood, as they are closely tied to developments around housing finance reform and the shifting regulatory tone on government-backed lenders. These factors are helping reshape risk perceptions across the sector.

Add in some renewed focus on policies affecting secondary mortgage markets, and it is easy to see why investors have been recalibrating their positions, either chasing the upside or hedging against sudden reversals. Through all of this, the company’s value score stands at 4 out of 6, meaning it is undervalued on four of six important checks we rely on. This suggests the stock is not getting ahead of itself despite those high-flying returns.

So, what is really behind Federal Home Loan Mortgage’s valuation? Next, we will walk through the key methods analysts use to gauge whether a company like this is truly priced right. Stick around, because there is an even more comprehensive approach to valuation that ties everything together at the end.

Federal Home Loan Mortgage delivered 735.1% returns over the last year. See how this stacks up to the rest of the Diversified Financial industry.

Approach 1: Federal Home Loan Mortgage Discounted Cash Flow (DCF) Analysis

The Discounted Cash Flow (DCF) model estimates a company's value by forecasting its future cash flows and discounting them back to present-day dollars. This approach helps investors gauge whether a stock's current price accurately reflects its long-term earning potential.

For Federal Home Loan Mortgage, analysts use a 2 Stage Free Cash Flow to Equity model. The company’s latest twelve-month Free Cash Flow stands at $14.521 billion. Looking ahead, estimates suggest this figure could rise to $17.37 billion by 2026, with projected annual growth rates moderating over the next decade. By 2035, Free Cash Flow is extrapolated to reach roughly $32.33 billion, based on a series of gradually decelerating growth rates. Simply Wall St provides these projections beyond year five to give a fuller long-term outlook.

The DCF analysis calculates an intrinsic fair value of $77.14 per share. With shares currently trading at a steep 85.3% discount to this value, the model suggests that Federal Home Loan Mortgage stock may be significantly undervalued at present.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Federal Home Loan Mortgage.

Our Discounted Cash Flow (DCF) analysis suggests Federal Home Loan Mortgage is undervalued by 85.3%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Federal Home Loan Mortgage Price vs Sales

The Price-to-Sales (P/S) ratio is a useful valuation tool for companies like Federal Home Loan Mortgage, especially when the business is profitable but might have volatile or negative earnings due to the cyclical nature of the industry. This metric gives investors a straightforward measure of how much they are paying for each dollar of revenue and is particularly helpful in financial sectors where profit margins can fluctuate significantly from year to year.

When considering valuation, growth expectations and company-specific risks play a big role in defining what constitutes a "fair" P/S ratio. Companies with solid prospects and lower risk typically command higher multiples. In contrast, slower-growing or riskier businesses warrant discounts.

Federal Home Loan Mortgage currently trades at a P/S ratio of 1.59x, which stands out as notably lower than both the Diversified Financial industry average of 2.48x and the peer average of 4.41x. On the surface, this might suggest the stock is trading at a bargain compared to competitors and the broader industry.

Simply Wall St refines this comparison further with its proprietary “Fair Ratio.” Unlike basic peer or industry averages, the Fair Ratio incorporates factors such as Federal Home Loan Mortgage’s growth outlook, risk profile, profit margins, size, and broader industry context. As a result, it provides a uniquely tailored benchmark for assessing whether the current P/S multiple is justified.

Comparing the Fair Ratio to Federal Home Loan Mortgage’s current P/S ratio provides a more nuanced view. In this case, the difference between the actual multiple and the Fair Ratio is less than 0.10, suggesting the shares are fairly valued at current levels.

Result: ABOUT RIGHT

PS ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Federal Home Loan Mortgage Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives. A Narrative is simply the story you tell from your own perspective about a company’s future, which you then link to financial forecasts like estimated revenue, earnings, and margins to arrive at your personal fair value for the stock. Narratives go beyond the raw numbers, helping you see the big picture by connecting why a company might win or lose with what that means for its financial future.

On Simply Wall St’s Community page, millions of investors use Narratives as an easy and accessible tool to express their views about companies like Federal Home Loan Mortgage. Narratives make it simple to compare your expected fair value with the current market price, helping you decide when to buy, sell, or hold. Best of all, they are updated automatically whenever news breaks or earnings are released, so your story stays current and relevant.

For example, one investor may predict rapid recovery in housing leading to a high fair value, while another might expect regulatory headwinds and set a much lower estimate, all in the same stock.

Do you think there's more to the story for Federal Home Loan Mortgage? Create your own Narrative to let the Community know!

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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