Initiating Coverage: New York Mortgage Trust Inc.

New York Mortgage Trust Inc. has been given a “Hold” rating, with a one-year target price of $6.75, which implies a potential 3% upside. This rating is based on a detailed evaluation of the company’s financial results compared to other companies in its sector, focusing on several crucial financial metrics.

The evaluation started with an analysis of the company’s revenue over the last twelve months (LTM), reporting $210 million. This is somewhat lower than the industry average of $226.97 million, indicating that while the company is competitive, it falls short in generating sales or service revenue. Furthermore, the company achieved positive revenue 50% of the time in the last two years, significantly lower than the industry average of 92.4%, highlighting issues in maintaining steady revenue. Also, there was no revenue growth reported over the LTM, in contrast to a 5% growth rate among its competitors, signaling potential operational or market challenges.

Regarding net income (NI) performance, the company posted positive net income 50% of the time over the past two years, which is close to the industry average of 53.3%, indicating moderate profitability stability. Remarkably, the company’s net income growth was 103% over the LTM, reflecting significant profitability improvement despite revenue and consistency challenges. This exceptional net income growth suggests the need to look into the company’s cost management strategies, operational efficiencies, or one-time gains.

The company’s Levered Free Cash Flow (LFCF) for the LTM was $29.95 million, lower than the industry median of $78.64 million, pointing to challenges in generating cash post-financial expenses. Despite this, the company had a 100% positive LFCF over the last two fiscal years, exceeding the industry average of 91.9%. Although this is an important achievement, a 67% decline in LFCF over the LTM raises concerns about the company’s ongoing operational and financial stability.

Further analysis of the company’s financial health revealed an Altman Z-Score of 6.16, indicating a strong financial position with minimal distress risk, significantly higher than the industry average. However, the shareholder yield was extremely negative at -268.5%, signaling problems in delivering value to shareholders. The debt to tangible equity ratio was 506.5%, showing a heavier reliance on debt.

The company’s dividend performance was also examined. The current dividend yield stands at 11.2%, suggesting an appealing payout compared to peers. Nonetheless, concerns about the sustainability of such dividends arise due to a high Dividend Yield/LFCF Yield ratio and a -50.0% dividend growth over the LTM, indicating potential financial risks.

When valuing the company’s shares, a dividend target based on 45% of the LFCF from the past two years was used, along with a 15X Dividend Multiple to highlight the attractiveness of sustainable dividends. The present valuation of $6.75, compared to a stock price of $7.16, suggests the shares might be slightly overvalued, warning interested investors. The forecasted stock price is $6.75, with an anticipated dividend of $0.60 for the next year, yielding an estimated total return of 3%.