Invesco Mortgage Capital Inc.

Invesco Mortgage Capital Inc. (NYSE: IVR) is a real estate investment trust (REIT) that invests in, funds, and manages mortgage-backed securities and loans for residential and commercial properties. The company's portfolio comprises residential mortgage-backed securities for which a US government agency guarantees payment of principle and interest. Invesco Advisers, a subsidiary of Invesco, is the company's asset manager.

Key Highlights:

• The company reported an average net interest rate margin improvement to 2.22% in Q4FY21 (ended December 31, 2021) from 2.15% in Q3FY21 (ended September 30, 2021).
• IVR reported a decline in total interest income to USD 169.20 million in FY21 vs. USD 280.17 million in FY20.
• However, it reported an improvement in net losses to USD 90 million in FY21 from USD 1.67 billion in FY20, due to significant gains on derivative instruments.
• At the end of December 31, 2021, IVR had a debt/equity ratio of 7.17x, compared to the industry median of 1.99x during the same timeframe.
• Stock is currently trading below its crucial short-term (50-day) and long-term (200-day) SMA support levels, indicating a bearish trend.
• Stock is leaning towards the lower band of the 52-week range of USD 2.04 to USD 4.60.
• IVR's stock price has been relatively volatile throughout the year and has fallen 45.59% in the past nine months.

Conclusion:

Considering the company's declining topline performance, bottom-line stress, robust leverage, macroeconomic headwinds, current trading levels, and hyped technical indicators, we recommend a "Watch" rating on the stock at the current price of USD 2.22, down 1.33% as of March 28, 2022, at 10:42 AM PDT.

Three-Year Technical Price Chart (as of March 28, 2022, at 10:42 AM PDT). Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary:

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

*Current price as of March 28, 2022, at 10:42 AM PDT

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.