Fannie Mae (FNMA): Valuation Perspectives as Conservatorship Exit Draws Investor Focus

Federal National Mortgage Association (FNMA) is attracting fresh attention as reports suggest it could soon emerge from government conservatorship. Investors are considering how this long-anticipated move might affect both common and preferred shares.

See our latest analysis for Federal National Mortgage Association.

Fannie Mae has not only drawn renewed investor attention over its possible exit from conservatorship, but has also seen sizable share price swings this year. After a meteoric year-to-date share price return of 209.3% with a remarkable 1-year total shareholder return of 665.47%, recent weeks have brought a correction. The stock is now trading at $10.64 following a 24.32% decline over the past 30 days. Overall, momentum is still running hot in the long term and recent board appointments and tech integrations suggest management is actively shaping the next chapter.

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With shares trading at a discount to book value and big moves looming, the question remains: has the recent pullback created an overlooked buying opportunity, or is the market already pricing in every ounce of Fannie Mae’s future growth?

Price-to-Sales of 2.1x: Is it justified?

Federal National Mortgage Association shares currently trade at a price-to-sales ratio of 2.1x, notably below both peers and industry averages. This suggests potential undervaluation at $10.64.

The price-to-sales ratio compares a company’s market value to its revenue. This provides an alternative lens for evaluating valuation, especially when profits are inconsistent or negative. For financial services giants like FNMA, this metric can offer a clearer picture than earnings-based multiples, particularly during periods of unprofitability.

FNMA’s price-to-sales of 2.1x stands out compared to the US Diversified Financial industry average of 2.5x and peer average of 4x. According to regression analysis, the estimated fair price-to-sales ratio for FNMA could be as high as 7.4x. This highlights significant room for re-rating if market sentiment improves or financial performance turns around.

Explore the SWS fair ratio for Federal National Mortgage Association

Result: Price-to-Sales of 2.1x (UNDERVALUED)

However, ongoing government involvement and recent analyst price targets, which are slightly below current levels, could challenge the case for significant near-term upside.

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

Build Your Own Federal National Mortgage Association Narrative

If you think there’s more to the story, or want to dig into the numbers and build your own view, you can assemble 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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