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3 Factors That Make Ellington Financial Stock a Solid Pick

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Ellington Financial Inc. EFC looks like an attractive investment option right now, given its strong fundamentals and promising prospects. Further, lower mortgage rates will continue leading to higher refinancing and originations.

Analysts are also bullish on the stock. The Zacks Consensus Estimate for Ellington Financial’s earnings has moved 4.1% and 4.5% upward for 2019 and 2020, respectively, over the past 30 days. The stock currently sports a Zacks Rank #1 (Strong Buy).

The company’s shares have rallied 14.4% over the past year, compared with the industry’s rise of 22.2%.

Here's Why Ellington Financial is Worth a Bet

Earnings strength: Given the relatively higher interest rates, Ellington Financial witnessed a 7.2% decline in earnings over the past three to five years. However, this trend is expected to reverse in the near term as evident from its projected earnings growth rate of 26.2% and 3.4% for 2019 and 2020, respectively.

Also, the company has an impressive earnings surprise history. It has outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 13.6%.

Revenue growth: Ellington Financial’s revenues witnessed a CAGR of 9.5% over the last five years (2014-2018). Additionally, rise in refinancing activities and higher origination volume are expected to continue supporting revenues. The top line is expected to increase 15.8% in 2019 and 15% in 2020.

Stock looks undervalued: If we compare Ellington Financial’s price-to-book (P/B) and price-to-earnings (F1) ratios with the respective industry averages, the stock appears undervalued. Its P/B and P/E ratios are 0.92 and 10.23 versus the respective industry averages of 1.30 and 10.85.

Other Key Picks

Over the past 30 days, Hilltop Holdings HTH witnessed an upward earnings estimate revision of 13% for 2019. Its share price has surged 33.7% year to date. The stock sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Moody's (MCO - Free Report) 2019 earnings estimates have been revised 1.5% upward over the past 30 days. Its shares have rallied 59.8% so far this year. The stock carries a Zacks Rank #2 (Buy).

Over the past 30 days, Eaton Vance’s EV fiscal 2020 earnings estimates have moved nearly 1% upward. Shares of this Zacks Rank #2 company have rallied 36.8% so far this year.

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