Mortgage investment firm Ellington Financial (NYSE: EFC) beat Wall Street’s revenue expectations in Q2 CY2025, with sales up 1.5% year on year to $92.54 million. Its non-GAAP profit of $0.47 per share was 16.6% above analysts’ consensus estimates.

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"Ellington Financial delivered a strong second quarter, with broad-based contributions from our diversified investment portfolio and loan origination platforms. We generated net income of $0.45 per share, equating to an annualized economic return of 13.8% for the quarter, with book value per share increasing quarter over quarter to $13.49. Meanwhile, our adjusted distributable earnings per share increased sharply by $0.08 to $0.47, significantly exceeding our $0.39 of dividends," said Laurence Penn, Chief Executive Officer and President.

Company Overview

Operating under the guidance of Ellington Management Group, a respected name in structured credit markets, Ellington Financial (NYSE: EFC) acquires and manages a diverse portfolio of mortgage-related, consumer-related, and other financial assets to generate returns for investors.

Sales Growth

Net interest income and and fee-based revenue are the two pillars supporting bank earnings. The former captures profit from the gap between lending rates and deposit costs, while the latter encompasses charges for banking services, credit products, wealth management, and trading activities.

Luckily, Ellington Financial’s revenue grew at an incredible 19.6% compounded annual growth rate over the last five years. Its growth beat the average bank company and shows its offerings resonate with customers.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Ellington Financial’s annualized revenue growth of 8.6% over the last two years is below its five-year trend, but we still think the results suggest healthy demand. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Ellington Financial reported modest year-on-year revenue growth of 1.5% but beat Wall Street’s estimates by 11.5%.

Net interest income made up 3.4% of the company’s total revenue during the last five years, meaning Ellington Financial is well diversified and has a variety of income streams driving its overall growth. Nevertheless, net interest income is critical to analyze for banks because they’re considered a higher-quality, more recurring revenue source by investors.

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Tangible Book Value Per Share (TBVPS)

Banks operate as balance sheet businesses, with profits generated through borrowing and lending activities. Valuations reflect this reality, emphasizing balance sheet strength and long-term book value compounding ability.

This explains why tangible book value per share (TBVPS) stands as the premier banking metric. TBVPS strips away questionable intangible assets, revealing concrete per-share net worth that investors can trust. Traditional metrics like EPS are helpful but face distortion from M&A activity and loan loss accounting rules.

Ellington Financial’s TBVPS declined at a 3.1% annual clip over the last five years. A turnaround doesn’t seem to be in sight as its TBVPS also dropped by 4.6% annually over the last two years ($14.83 to $13.49 per share).

Key Takeaways from Ellington Financial’s Q2 Results

We were impressed by how significantly Ellington Financial blew past analysts’ revenue expectations this quarter. We were also excited its tangible book value per share outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 1.3% to $12.84 immediately following the results.

Ellington Financial put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. We think that the latest quarter is only one piece of the longer-term business quality puzzle. Quality, when combined with valuation, can help determine if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.