Stock Valuation Essay
Invesco mortgage a Real-Estate investment trust company is a company that provides adjusted risk, to its customers primarily through dividend payout and secondly through capital appreciation. IVR isn’t the company seeking a favorable positive image in the community. Ivrs sole purpose is to generate profit and distribute it to the shareholder. As a mortgage specialist, Invesco has been well positioned to capitalize on the rebound in home values, rising mortgage volumes and lower delinquency rates.
That has analysts looking for full-year earnings of $2 a share this year. With a price-to-earnings (P/E) ratio of 8 times, below its peer average of 10, Invesco has value in addition to a serious yield of 13%. Upon further analysis of IVR and the company’s financial statements one can view a hybrid financial culture that some conventional ratio analysis doesn’t lend itself too. For instance generally one major ratio that can identify a company’s current capability to meet all of its financial obligations is the acid ratio test.
IVR has an Acid ratio test of 1. 7. A company’s profit before depreciation and amortization to current liabilities indicates the companies’ ability to satisfy its short term obligations, the higher the PDACL ratio the better. PDACL ratio can be calculated by taking the company’s profit before depreciation and amortization divided by the company’s current liabilities. For Ivr this means $339,885 divided by 3,541 = . 95 or 95%. IVR net profit margin is 856% the net profit margin is calculated by taking net income divided by sales then multiplying the answer by 100.
The net profit margin is best measured year over year and compared to industry competitors in order to identify a company’s efficiency as compared to other market participators. A recent article appeared in motley fool By (Adnan Khan – June 4, 2013). This article discussed Reit and what the forecast is for the industries market. According to Khan Hybrid business models stand the best chance of succeeding. A pick he viewed favorably is TWO. Yes TWO is truly the companies’ symbol on the exchange.
Now let’s talk financials Two has a market capitalization of 1. 6 billion dollars. The current acid ratio for TWO is 1. 27 . Two has a PADCL ratio of 7. 56 percent which is a pretty high margin of safety meaning two could be a safe investment. One significant area of strength for IVR over TWO is the Operating cash flows to current liabilities ratio. Currently TWO has a ratio of . 9%. This ratio illustrates a company’s ability to create a profit off current cash flow and the ability to meet current debt obligations with current cash flows. A low value of OFCL identifies slightly higher risk.
University/College: University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Date: 21 October 2016
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