A Fresh Look at Fannie Mae (FNMA) Valuation Following Recent Share Price Momentum

Federal National Mortgage Association (FNMA) shares have seen some interesting moves lately, with a steady performance over the past month and a notable 35% gain in the past 3 months. Investors seem to be paying close attention to any signals in the broader mortgage market as they weigh future prospects for FNMA.

See our latest analysis for Federal National Mortgage Association.

After a phenomenal rally earlier this year, Federal National Mortgage Association’s share price momentum has cooled a bit, but its long-term story remains hard to ignore. While the 1-month share price return sits in the red, the 1-year total shareholder return is a staggering 685%, which underscores just how much investor sentiment has shifted around FNMA and perceived growth opportunities.

If recent swings in the mortgage sector have caught your attention, you might want to broaden your perspective and discover fast growing stocks with high insider ownership

Given FNMA’s steep climb and the recent cooling of its share price, the question becomes whether the market has already factored in all future growth or if there is still an attractive entry point for investors.

Price-to-Sales Ratio of 2.3x: Is it justified?

Federal National Mortgage Association trades at a price-to-sales ratio of 2.3x, which puts it comfortably below both its peer group and the broader industry. With the stock closing at $11.54, this metric suggests FNMA could be undervalued relative to competitors on a sales basis.

The price-to-sales (P/S) ratio is a tool for comparing a company’s market value to its revenue and is often used in the financial sector when earnings are volatile or negative. It is particularly relevant for FNMA, which is currently unprofitable and thus less suited to traditional profit-based valuation multiples.

FNMA’s P/S ratio is significantly below the peer average of 4.3x and the US Diversified Financial industry average of 2.5x. Notably, the figure is also well beneath the estimated fair price-to-sales ratio of 7.5x. This indicates the stock might have room to run if the market eventually re-rates it closer to this benchmark.

Explore the SWS fair ratio for Federal National Mortgage Association

Result: Price-to-Sales of 2.3x (UNDERVALUED)

However, the unprofitable status and recent analyst price targets that are below current levels could challenge the optimism around FNMA’s long-term valuation prospects.

Find out about the key risks to this Federal National Mortgage Association narrative.

Build Your Own Federal National Mortgage Association Narrative

Keep in mind that if you have a different perspective or want to dive deeper into the numbers, you can put together your own narrative in just a few minutes. Do it your way

A great starting point for your Federal National Mortgage Association 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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