Investment Thesis
Freddie Mac demonstrates paradoxical fundamentals with exceptionally high revenue growth (+506.6% YoY) and strong net income recovery (+13857.7% YoY), yet exhibits concerning leverage (2.41x debt/equity) and dangerously low interest coverage (0.1x) that suggests vulnerability to rate shocks. As a government-sponsored enterprise with $3.5T in assets, the company benefits from implicit federal backing but faces systematic interest rate risk and housing market cyclicality.
Strengths
- Exceptional operating cash flow of $19.4B with 14.9% FCF margin demonstrates strong underlying cash generation
- Substantial ROE of 15.2% indicates effective capital deployment despite massive balance sheet
- Recovery in net income from near-zero baseline suggests stabilization after previous stress periods
Risks
- Critically low interest coverage ratio (0.1x) indicates debt service heavily dependent on operating performance and implies minimal margin for adverse events
- Extreme leverage at 2.41x debt/equity with $169.3B long-term debt creates significant refinancing and rate sensitivity risk
- Massive revenue growth (+506.6% YoY) appears anomalous and potentially reflects accounting adjustments or portfolio swaps rather than organic business expansion, raising data quality concerns
Key Metrics to Watch
- Interest coverage ratio trend - any further deterioration signals distress potential
- Debt-to-equity ratio and refinancing maturity schedule - vulnerability to rising rates
- Operating cash flow sustainability - ability to service debt amid rate environment changes
Financial Metrics
Revenue
129.8B
Net Income
10.7B
EPS (Diluted)
$-0.02
Free Cash Flow
19.4B
Total Assets
3.5T
Cash
5.3B
Profitability Ratios
Gross Margin
N/A
Operating Margin
10.3%
Net Margin
8.3%
ROE
15.2%
ROA
0.3%
FCF Margin
14.9%
Balance Sheet & Liquidity
Current Ratio
N/A
Quick Ratio
N/A
Debt/Equity
2.41x
Debt/Assets
98.0%
Interest Coverage
0.12x
Long-term Debt
169.3B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-03-25T02:42:11.690953 |
Data as of: 2025-12-31 |
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