Assessing Two Harbors Investment (TWO) Valuation After Recent Share Price Swings And Conflicting Value Signals
Two Harbors Investment (TWO) has been drawing attention after recent share price swings, with returns ranging from a 2% gain over the past month to a 4% loss year to date.
See our latest analysis for Two Harbors Investment.
With the share price at $10.41, the recent 4.73% 3 month share price return suggests some positive momentum, even though the year to date share price return is slightly negative and the 5 year total shareholder return remains weak.
If Two Harbors Investment has you reassessing income focused ideas, this could be a good moment to broaden your watchlist with fast growing stocks with high insider ownership.
With Two Harbors Investment trading at $10.41 and an estimated value gap implied by its intrinsic discount and modest cushion to analyst targets, you have to ask yourself: is this a genuine value opportunity, or is the market already pricing in future growth?
On our numbers, Two Harbors Investment screens as good value using a P/S ratio of 2x, yet it also sits well above an estimated fair P/S of 0.3x.
P/S compares the company’s market value to its revenue, which can be a useful reference point for a mortgage REIT where traditional earnings metrics are currently distorted by losses.
Here, the picture is mixed. The current 2x P/S is far lower than the US Mortgage REITs industry average of 4.7x and below peer averages, which points to a discounted revenue multiple. At the same time, it is high relative to the 0.3x fair P/S estimate, suggesting the market price could still move closer to that lower level if sentiment or expectations shift.
Explore the SWS fair ratio for Two Harbors Investment
Result: Price-to-Sales of 2x (ABOUT RIGHT)
However, the weak 5 year total return, the sharp annual revenue contraction of 145%, and the current net loss of $242.6 million could challenge any simple value story here.
Find out about the key risks to this Two Harbors Investment narrative.
While the 2x P/S ratio presents Two Harbors Investment as relatively cheap compared with the Mortgage REITs peer group, our DCF model points in a different direction. On those numbers, the shares look undervalued, trading 38.5% below an estimated fair value of US$16.93. This raises the question of which signal you should treat as your anchor.
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Two Harbors Investment for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 877 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.
