What is NLY's Intrinsic value?

Annaly Capital Management Inc (NLY) Intrinsic Value Analysis

Executive Summary

As of May 23, 2025, Annaly Capital Management Inc's estimated intrinsic value ranges from $39.16 to $193.76 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $193.76 +934.5%
Dividend Discount Model (Stable) $39.16 +109.1%

Is Annaly Capital Management Inc (NLY) undervalued or overvalued?

With the current market price at $18.73, the stock appears to be significantly undervalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Annaly Capital Management Inc's intrinsic value, including:

  1. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.59 0.71
Cost of equity 6.6% 8.9%
Cost of debt 4.0% 23.9%
Tax rate 2.1% 2.5%
Debt/Equity ratio 7.55 7.55
After-tax WACC 4.2% 21.6%

Valuation Methods

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 149.1%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.7%
  • Long-term growth rate: 3.5%
  • Fair value: $193.76 (934.5% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 8.9% (Low) to 6.6% (High)
  • Long-term growth rate: 3.0% (Low) to 4.0% (High)
  • Fair value range: $20 to $58
  • Selected fair value: $39.16 (109.1% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $11192M
Enterprise Value $99309M
Trailing P/E 11.17
Forward P/E 3.90
Trailing EV/EBITDA 36.40
Current Dividend Yield 1257.99%
Dividend Growth Rate (5Y) 0.30%
Debt-to-Equity Ratio 7.55

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Dividend Discount Model (Multi-Stage) 57% $38.75
Dividend Discount Model (Stable) 43% $5.87
Weighted Average 100% $127.50

Investment Conclusion

Based on our comprehensive valuation analysis, Annaly Capital Management Inc's weighted average intrinsic value is $127.50, which is approximately 580.7% above the current market price of $18.73.

Key investment considerations:

  • Strong projected earnings growth (17% to 38% margin)
  • Consistent cash flow generation
  • Historical dividend growth of 0.30%

Given these factors, we believe Annaly Capital Management Inc is currently significantly undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.