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Invesco Mortgage Capital Inc. (NYSE:IVR) Has Found A Path To Profitability

With the business potentially at an important milestone, we thought we'd take a closer look at Invesco Mortgage Capital Inc.'s (NYSE:IVR) future prospects. Invesco Mortgage Capital Inc. operates as a real estate investment trust (REIT) that primarily focuses on investing in, financing, and managing mortgage-backed securities and other mortgage-related assets. The US$473m market-cap company announced a latest loss of US$417m on 31 December 2022 for its most recent financial year result. As path to profitability is the topic on Invesco Mortgage Capital's investors mind, we've decided to gauge market sentiment. We've put together a brief outline of industry analyst expectations for the company, its year of breakeven and its implied growth rate.

View our latest analysis for Invesco Mortgage Capital

Consensus from 2 of the American Mortgage REITs analysts is that Invesco Mortgage Capital is on the verge of breakeven. They anticipate the company to incur a final loss in 2022, before generating positive profits of US$231m in 2023. The company is therefore projected to breakeven around 12 months from now or less. At what rate will the company have to grow in order to realise the consensus estimates forecasting breakeven in under 12 months? Using a line of best fit, we calculated an average annual growth rate of 110%, which is rather optimistic! If this rate turns out to be too aggressive, the company may become profitable much later than analysts predict.

earnings-per-share-growth
earnings-per-share-growth

Given this is a high-level overview, we won’t go into details of Invesco Mortgage Capital's upcoming projects, however, bear in mind that by and large a high forecast growth rate is not unusual for a company that is currently undergoing an investment period.

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Before we wrap up, there’s one issue worth mentioning. Invesco Mortgage Capital currently has a debt-to-equity ratio of over 2x. Typically, 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 in investing in the loss-making company.

Next Steps:

There are key fundamentals of Invesco Mortgage Capital which are not covered in this article, but we must stress again that this is merely a basic overview. For a more comprehensive look at Invesco Mortgage Capital, take a look at Invesco Mortgage Capital's company page on Simply Wall St. We've also compiled a list of important aspects you should further examine:

  1. Historical Track Record: What has Invesco Mortgage Capital'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.

  2. Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on Invesco Mortgage Capital's board and the CEO’s background.

  3. 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. 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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