Since March 2025, Ellington Financial has been in a holding pattern, posting a small loss of 1% while floating around $13.28. The stock also fell short of the S&P 500’s 16.8% gain during that period.

Is there a buying opportunity in Ellington Financial, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Do We Think Ellington Financial Will Underperform?

We're cautious about Ellington Financial. Here are three reasons why EFC doesn't excite us and a stock we'd rather own.

1. Net Interest Income Points to Soft Demand

Net interest income commands greater market attention due to its reliability and consistency, whereas one-time fees are often seen as lower-quality revenue that lacks the same dependable characteristics.

Ellington Financial’s net interest income has grown at a 5% annualized rate over the last five years, worse than the broader banking industry and slower than its total revenue.

2. EPS Growth Has Stalled

Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.

Ellington Financial’s flat EPS over the last five years was below its 19.6% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

3. Declining TBVPS Reflects Erosion of Asset Value

We consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation.

To the detriment of investors, Ellington Financial’s TBVPS continued freefalling over the past two years as TBVPS declined at a -4.2% annual clip (from $14.83 to $13.60 per share).

Final Judgment

We cheer for all companies supporting the economy, but in the case of Ellington Financial, we’ll be cheering from the sidelines. With its shares underperforming the market lately, the stock trades at 1× forward P/B (or $13.28 per share). This multiple tells us a lot of good news is priced in - we think other companies feature superior fundamentals at the moment. We’d recommend looking at our favorite semiconductor picks and shovels play.

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