Chimera Investment (CIM) Higher as mREIT Industry Rallies

NEW YORK (TheStreet) -- Chimera Investment Corporation (CIM) has gained over the Friday and Monday trading sessions in a broad industry-wide rally on real estate investment trusts (REITs). The industry saw a boost late last week after a robust November jobs report gave Wall Street confidence an economic recovery was gaining traction.

By late afternoon, Chimera had moved 3.3% higher to $3.11, adding to an overall 19% increase since January. Fellow mortgage REITs Annaly Capital Management (NLY) and CYS Investments (CYS) have climbed 2.3% and 2.8%, respectively, over the trading session.

On Friday, TheStreet Ratings team upgraded Chimera Investment Corp to a "Buy" from "Hold" with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate Chimera Investment Corp (CIM) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, attractive valuation levels, expanding profit margins, increase in stock price during the past year and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income increased by 313.3% when compared to the same quarter one year prior, rising from -$60.04 million to $128.07 million.
  • The gross profit margin for Chimera Investment Corp is currently very high, coming in at 88.74%. Regardless of CIM's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, CIM's net profit margin of 88.50% significantly outperformed against the industry.
  • Compared to where it was 12 months ago, the stock is up, but it has so far lagged the appreciation in the S&P 500. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Chimera Investment Corp reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, Chimera Investment Corp reported lower earnings of 13 cents a share vs. 29 cents a share in the prior year. This year, the market expects an improvement in earnings (39 cents vs. 13 cents).

TheStreet Ratings team rates Annaly Capital Management as a Hold with a ratings score of C. The team has this to say about their recommendation:

"We rate Annaly Capital Management (NLY) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its notable return on equity, attractive valuation levels and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, weak operating cash flow and a generally disappointing performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company's current return on equity greatly increased when compared to its ROE from the same quarter one year prior. This is a signal of significant strength within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, Annaly Capital Management's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • The gross profit margin for Annaly Capital Management is currently very high, coming in at 91.13%. Regardless of NLY's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, NLY's net profit margin of 29.04% compares favorably to the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has decreased by 14.4% when compared to the same quarter one year ago, dropping from $224.76 million to $192.46 million.
  • Net operating cash flow has significantly decreased to $810.87 million or 77.46% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

TheStreet Ratings team rates CYS Investments Inc as a Sell with a ratings score of D. The team has this to say about their recommendation:

"We rate CYS Investments Inc (CYS) a SELL. This is driven by some concerns, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, disappointing return on equity and generally disappointing historical performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • CYS Investments Inc has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last year. We anticipate that this should continue in the coming year. During the past fiscal year, CYS Investments Inc reported lower earnings of $2.75 a share vs. $3.63 a share in the prior year. For the next year, the market is expecting a contraction of 49.5% in earnings ($1.39 vs. $2.75).
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Real Estate Investment Trusts (REITs) industry. The net income has significantly decreased by 87.4% when compared to the same quarter one year ago, falling from $241.91 million to $30.57 million.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Real Estate Investment Trusts (REITs) industry and the overall market, CYS Investments Inc's return on equity significantly trails that of both the industry average and the S&P 500.
  • Despite any intermediate fluctuations, we have only bad news to report on this stock's performance over the last year: it has tumbled by 41.27%, worse than the S&P 500's performance. Consistent with the plunge in the stock price, the company's earnings per share are down 90.41% compared to the year-earlier quarter. Naturally, the overall market trend is bound to be a significant factor. However, in one sense, the stock's sharp decline last year is a positive for future investors, making it cheaper (in proportion to its earnings over the past year) than most other stocks in its industry. But due to other concerns, we feel the stock is still not a good buy right now.
  • The gross profit margin for CYS Investments Inc is currently very high, coming in at 93.46%. It has increased from the same quarter the previous year. Along with this, the net profit margin of 35.69% significantly outperformed against the industry average.
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