Is Freddie Mac (FMCC) Shares Undervalued After Recent Surge? A Look at Current Valuation

Federal Home Loan Mortgage (FMCC) shares have seen a swing over the past several months, reflecting the shifting dynamics in the broader financial sector. The stock’s performance hints at changing investor sentiment, even though there is no clear headline event driving recent moves.

See our latest analysis for Federal Home Loan Mortgage.

Federal Home Loan Mortgage’s share price has surged dramatically in 2024, with a 242.73% year-to-date gain fueling renewed attention. Despite some recent pullback, momentum remains compelling, supported by an astonishing 895.69% total shareholder return over the past year.

If you’re curious about where this kind of momentum might show up next, it’s a great time to broaden your search and discover fast growing stocks with high insider ownership

After such outsized gains, the real question is whether Federal Home Loan Mortgage’s shares are still trading at a discount compared to their true value, or if the market has already factored in every ounce of future growth potential.

Price-to-Sales Ratio of 1.6x: Is it justified?

Federal Home Loan Mortgage is currently trading at a price-to-sales ratio of 1.6x, which suggests its shares are valued noticeably cheaper relative to sales compared to both its industry and peer averages. With a last close price of $11.55, this gap could be offering an intriguing opportunity for value-focused investors.

The price-to-sales (P/S) ratio shows how much investors are willing to pay per dollar of sales. This makes it a crucial tool when earnings are negative or volatile. For diversified financials like Federal Home Loan Mortgage, the P/S ratio can highlight whether the market expects top-line growth or is pricing in ongoing risks.

As of now, Federal Home Loan Mortgage's P/S ratio is below the U.S. Diversified Financial industry average of 2.6x and also beneath the peer group average of 4.1x. This gap indicates that the market is pricing the company at a meaningful discount, even relative to similarly positioned peers. There is insufficient data to determine a fair P/S ratio, so this multiple could trend toward sector norms if company fundamentals improve.

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

Result: Price-to-Sales of 1.6x (UNDERVALUED)

However, ongoing net losses and unpredictable earnings trends could challenge the case for a rebound, particularly if market sentiment shifts toward more stable and profitable sectors.

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

Another View: What Does Our DCF Model Say?

Looking at Federal Home Loan Mortgage through the lens of our SWS DCF model offers an even more dramatic picture. The shares trade about 85% below our DCF-calculated fair value, suggesting the market may be overlooking significant intrinsic worth. However, is the disconnect an opportunity, or does the market see risks the model cannot identify?

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 see the numbers differently or want to draw your own conclusions, you can easily craft your own narrative 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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