Fannie Mae-No Politics (FNMA)

[Wise Man]

RELATIVE VALUATION MODEL IS DEVASTATING FOR THE FNMA HOLDERS.
After calculating the adjusted EPS, and from the buyer UST's point of view in the case of a Taking (it pays no Income Tax), the relative valuation model using the Price-Earnings-Ratio (PER), is devasting for Fannie Mae when considering the Unamortized Premiums or Deferred Income, in comparison with its only industry peer, Freddie Mac.
PE ratios
FNMA: 4.4 times
FMCC: 2.3 times
If we apply a 2.3 multiple in FNMA, the fair value drops to $75 from $131ps.
FMCC's stands at $170ps.
Why is the Deferred Income so important in a PE ratio? Because this multiple represents the number of years to recoup the investment with a determined annual earnings. The Deferred Income could be amortized into earnings in one fell swoop and thus, the UST would recover its investment sooner, which is what the PER is about.
With FMCC, the UST would recover its investment via EPS (earnings before taxes) and amotization of the Deferred Income, in 2.3 years, that is, two years and four months.
With FNMA's fair value at 4.4 times under another theory called "UST's breakeven price under the law", it's expense. For a Taking the law requires a fair value and using a Relative Valutation Model, is devastating.
Not considering this Deferred Income in a stock valuation, is unprofessional.
Other way to see it, is considering that the FMCC's fair value is too cheap in comparison with FNMA, and its fair value should be $245 instead of $170, although I doubt that the UST will choose this option.
Other theme is that it should be explained why Freddie Mac amassed such an enormous Deferred Income.

A DEEPER RELATIVE VALUATION LOWERS THE FAIR VALUE OF $FNMA TO $75
Comparing it with its only industry peer, $FMCC,the PER for the @USTreasury is only 2.3x, due to the Deferred Income(upfront g-fee already collected)
The combined Mkt Cap for a Taking: $197B.#Fanniegate @WhiteHouse https://t.co/EYHzZIA25e

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