With the business potentially at an important milestone, we thought we'd take a closer look at ARMOUR Residential REIT, Inc.'s (NYSE:ARR) future prospects. ARMOUR Residential REIT, Inc. invests in residential mortgage backed securities in the United States. The US$777m market-cap company announced a latest loss of US$225m on 31 December 2020 for its most recent financial year result. The most pressing concern for investors is ARMOUR Residential REIT's path to profitability - when will it breakeven? Below we will provide a high-level summary of the industry analysts' expectations for the company.
See our latest analysis for ARMOUR Residential REIT
Expectations from some of the American Mortgage REITs analysts is that ARMOUR Residential REIT is on the verge of breakeven. They anticipate the company to incur a final loss in 2020, before generating positive profits of US$91m in 2021. The company is therefore projected to breakeven around 12 months from now or less. How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 116% year-on-year, on average, which signals high confidence from analysts. If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.
Given this is a high-level overview, we won't go into details of ARMOUR Residential REIT's upcoming projects, though, keep in mind that generally a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.
One thing we would like to bring into light with ARMOUR Residential REIT is its debt-to-equity ratio of over 2x. Generally, the rule of thumb is debt shouldn't exceed 40% of your equity, and the company has considerably exceeded this. A higher level of debt requires more stringent capital management which increases the risk around investing in the loss-making company.
This article is not intended to be a comprehensive analysis on ARMOUR Residential REIT, so if you are interested in understanding the company at a deeper level, take a look at ARMOUR Residential REIT's company page on Simply Wall St. We've also compiled a list of relevant aspects you should further examine:
Historical Track Record: What has ARMOUR Residential REIT's performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Management Team: An experienced management team on the helm increases our confidence in the business - take a look at who sits on ARMOUR Residential REIT's board and the CEO's background.
Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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