Shares of AG Mortgage Investment Trust, Inc. (MITT) ended the trading session of August 15 at an all-time high of $23.49, aided by strong market fundamentals amidst growing evidence of stabilization in the housing market. With a 14.7% earnings surprise in the second quarter of 2012 and a year-to-date return of 26.6%, this Zacks #1 Rank (Strong Buy) mortgage REIT (real estate investment trust) looks to be a solid momentum pick.
Strong Second Quarter
On August 7, AG Mortgage Investment Trust reported strong second quarter results with a 27.6% annualized return on stock and a 14.5% return on equity. Net income for the quarter was $2.85 per share. Core earnings came in at 86 cents per share, surpassing the Zacks Consensus Estimate by 11 cents or approximately 14.7%.
Net interest income of $15.4 million was derived from an investment portfolio of $2.7 billion that had a weighted average yield of 3.54%. Weighted average cost of funds was 0.99%, resulting in a net interest margin of 2.55% for the quarter. Net book value per share at quarter-end stood at $21.78.
Surge in Earnings Estimate Revisions
Over the past 30 days, the Zacks Consensus Estimate for 2012 increased 71.2% to $5.24 as both estimates were revised upward. For 2013, the Zacks Consensus Estimate has increased 12.4% to $3.45 over the same period, as three estimates out of four increased.
Reasonable Valuation
AG Mortgage Investment Trust’s valuation looks reasonable on a price-to-earnings (P/E) and price-to-book (P/B) basis. Shares of AG Mortgage Investment Trust are trading at a forward P/E of 4.49x, a 36.2% discount to the peer group average of 7.04x. On a P/B basis, the stock is currently trading at 1.08x versus the peer group average of 1.02x.
Chart Resonates Growth Potential
Since June 5, 2012, shares of AG Mortgage Investment Trust have fared better than the simple moving average for 50 days or SMA (50). The uptrend in stock prices, as mirrored in the following chart, offers an enticing upside potential going forward. Volume is fairly strong, averaging 376K daily. The stock has also outperformed the S&P 500 index since May 18, 2012, with a year-to-date return of 26.6% compared to an S&P 500 tally of 10.1%.
Based in New York, AG Mortgage Investment Trust invests in and manages a diversified portfolio of residential mortgage assets and other real estate-related securities and financial assets. The company primarily invests in agency residential mortgage-backed securities (RMBS), where payments are guaranteed by the U.S. government or government-owned entities. At the same time, the company also invests in fixed- and floating-rate non-agency RMBS that do not possess such guaranteed payments.
In addition, AG Mortgage Investment Trust invests in fixed- and floating-rate commercial mortgage-backed securities; residential mortgage loans secured by residential real property; first or second lien loans; mezzanine financing secured by interests in commercial real estate; and bridge loans. The company presently has a market cap of $370.2 million.
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