Investment Thesis
Fannie Mae demonstrates solid profitability with 9.1% net margins and strong operating cash flow of $24B, but faces critical solvency concerns with a 38.12x debt-to-equity ratio and dangerously low 0.6x interest coverage that suggests limited financial flexibility. The extreme 159,500% YoY net income growth appears anomalous and likely reflects recovery from prior losses rather than sustainable operational improvement.
Strengths
- Strong absolute cash generation with $24B operating cash flow
- Solid net profit margin of 9.1% demonstrating operational efficiency
- Reasonable 13.2% return on equity indicating acceptable shareholder returns
- Substantial revenue base of $158.6B providing scale
Risks
- Critically high leverage with 38.12x debt-to-equity ratio indicating systemic financial risk
- Dangerously low interest coverage of 0.6x suggests inability to service debt from operations
- Government-sponsored enterprise status creates political and regulatory execution risk
- Extreme YoY metrics suggest volatility and potential accounting normalization effects rather than true growth
- Minimal ROA of 0.3% despite $4.3T asset base indicates poor asset utilization efficiency
Key Metrics to Watch
- Interest coverage ratio trend - must improve above 1.5x for safety
- Debt-to-equity ratio - target below 20x for federally-sponsored entity
- Net interest margin sustainability amid rate environment changes
- Operating cash flow consistency and quality
- Regulatory capital requirements and compliance status
Financial Metrics
Revenue
158.6B
Net Income
14.4B
EPS (Diluted)
$0.00
Free Cash Flow
24.0B
Total Assets
4.3T
Cash
11.5B
Profitability Ratios
Gross Margin
N/A
Operating Margin
11.3%
Net Margin
9.1%
ROE
13.2%
ROA
0.3%
FCF Margin
15.1%
Balance Sheet & Liquidity
Current Ratio
N/A
Quick Ratio
N/A
Debt/Equity
38.12x
Debt/Assets
97.5%
Interest Coverage
0.60x
Long-term Debt
4.2T
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: 2026-03-25T04:22:11.708789 |
Data as of: 2025-12-31 |
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