Is Capstead Mortgage (CMO) a good stock for an investor?

0
8


Value investing is one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that either fly by and grab attention, or offer tempting discounts over fair value?

One way to find these companies is to look at several key metrics and financial ratios, many of which are critical in the stock selection process. let’s Capstead Mortgage Corporation CMO stock in this equation and find out if it is a good choice for value-minded investors right now, or investors subscribing to this methodology should look elsewhere for better options:

PE coefficient

The key metric that investors always pay attention to is the price-to-earnings ratio, or PE for short. This shows us how much investors are willing to pay for every dollar of profit on a given stock, and is by far one of the most popular financial ratios in the world. It is best to use the PE ratio to compare the current PE ratio of a stock with: a) where the ratio was in the past; b) how it compares to the industry / sector average; and c) how it relates to the market as a whole.

In this regard, Capstead Mortgage has a twelve-month final PE ratio of 9.74, as you can see in the chart below:

Zacks Investment Research

Zacks Investment Research

Image source: Zacks Investment Research

This level actually compares favorably with the market as a whole, as the PE for the S&P 500 is around 28.79. If we focus on the long-term PE trend, Capstead Mortgage PE is below the five-year average. Moreover, the current level is well below the highs of this stock, which suggests that this could be a good entry point.

Zacks Investment Research

Zacks Investment Research

Image source: Zacks Investment Research

However, the stock’s PE also compares unfavorably to the Zacks Finance twelve-month PE rolling coefficient of 18.9. At the very least, this indicates that the stock is now slightly undervalued compared to peers.

Zacks Investment Research

Zacks Investment Research

Image source: Zacks Investment Research

We should also note that Capstead Mortgage’s forward earnings ratio (price relative to this year’s earnings) is only 10.6, so it is fair to expect the company’s share price to rise in the near future.

P / S ratio

Another important metric to look at is the price / sales ratio. This approach compares the price of a given stock to its total sales, with a lower value generally being considered better. Some people like this metric more than other value-oriented people because it takes into account sales, which is something that is much more difficult to manipulate with accounting gimmicks than profit.

Capstead Mortgage has a P / S ratio of about 4.06 right now. This is well below the S&P 500 average of 5.38. Also, as we can see in the chart below, this is slightly below the highs for this stock, in particular over the past few years.

Zacks Investment Research

Zacks Investment Research

Image source: Zacks Investment Research

Prospects for widespread use

Overall, Capstead Mortgage currently has a B value, which places it in the top 40% of stocks we look at in this roundup. This makes Capstead Mortgage a solid choice for value investors, and several other key metrics make it pretty obvious as well.

For example, Capstead Mortgage has a P / CF ratio of 3.58, which is markedly better than the industry average of 7.84. Clearly, CMO is a solid choice on the value front from multiple perspectives.

What about stocks in general?

While Capstead Mortgage can be a good choice for value investors, there are many other factors to consider before investing in this name. In particular, it is worth noting that the company has a growth rating of D and a momentum rating of C. This gives Capstead Mortgage a Zacks VGM rating – or its overall fundamental rating – C. (You can read more about the Zacks style ratings here >>)

Meanwhile, the company’s recent earnings estimates are encouraging. This has had a noticeable impact on the consensus estimate, as the current year’s consensus estimate is down 5% over the past two months, while the 2022 estimate has improved 1.6% over the past two months. You can see the trend of the consensus estimate and the recent movement in the stock price in the chart below:

Capstead Mortgage Corporation Pricing and Consensus

Capstead Mortgage Corporation Pricing and Consensus

Capstead Mortgage Corporation Pricing and Consensus

Capstead Mortgage Corporation Consensus Price Chart | Capstead Mortgage Corporation Quotes

Due to bearish valuations, the stock has a Zacks # 3 (Hold) rating, so we expect the stock to be dynamic in the near future.

Bottom line

Capstead Mortgage is a great choice for value investors as it is hard to beat its incredible stats on this front. However, having achieved Zacks Rank 3, the company as a whole is underwhelming. In fact, over the past two years, this sector has clearly lagged behind the market as a whole, as you can see below:

Zacks Investment Research

Zacks Investment Research

Image source: Zacks Investment Research

As such, value investors may want to wait for valuations, analyst sentiment and broader factors to roll over in that name first, but once that happens, this stock can be a compelling choice.

Looking for the latest recommendations from Zacks Investment Research? Today you can download the top 7 stocks for the next 30 days. Click to get this free report

Capstead Mortgage Corporation (CMO) Free Stock Analysis Report

To read this article on Zacks.com, click here.

Zacks Investment Research



Source link

LEAVE A REPLY

Please enter your comment!
Please enter your name here