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Impac Mortgage Holdings Inc. Message Board

  • ksu_50 ksu_50 Nov 1, 2012 10:08 AM Flag

    How high IMH can go?

    Two consecutive excellent earning, much more than OCN. How high IMH can go? Or, what is the fair value? Thanks.

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    • Profits from lending are rising at 20% per quarter. Q3 was over $1. With no further increase, next years profit would be $4/share. That makes it at the very least a $20 stock with a PE of 5.

      But when profits are rising at 20%/quarter, they double in a year; that's 100% increase. That means the PE to Growth ratio or PEG is 5/100 or 0.05, which is unprecedentedly attractive. Normally, a PEG of 1 is a good investment. So IMH could theoretically be worth 20 times $20, or $400/share. Of course, that is what it once was, pre-reverse-split.

      So, if its fortunes are truly on the way to reversal, it is not unreasonable to think this high. The caveat as that they will have to issue more shares to maintain this growth rate, so there will be dilution. But $20 fairly soon and $40 sometime next year is in the tea leaves

      Sentiment: Strong Buy

      • 2 Replies to cloggervic
      • Yeah,I just need it to get to $300 per share to break even.This discussion is a joke.

      • Agreed except for the share isuuance thing. As a mortgage originator, the debt they have on the balance sheet is related to the fact that they (like all financial institutions) have debt related to their originations. Growth will come from expanding their balance sheet through debt, not equity. As a proxy for valuation, the best comparables are Walter Investment Management, Ocwen Financial and Nationstar Mortgage, the cheapest of which trades at 10x forward earnings and something like 30x trailing as the industry is turning a corner after a very long time. Also, when IMH was earning about $1.50 per share per quarter during the peak of the housing bubble, it had a stock price in the $200-$250 per share range. Unfortunately for alot of current holders, their cost basis a EXTREMELY high, which should lead to a dispropensity to sell at $20 per share. IT will take time, but its rare to find stocks this compelling with almost everything being perfect.

        GLTA

        Sentiment: Strong Buy

 
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