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3 Reasons to Avoid EFC and 1 Stock to Buy Instead

By: StockStory

September 19, 2025 at 00:01 AM EDT

EFC Cover Image

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.

Ellington Financial Trailing 12-Month Net Interest Income

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.

Ellington Financial Trailing 12-Month EPS (Non-GAAP)

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).

Ellington Financial Quarterly Tangible Book Value 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.

Stocks We Like More Than Ellington Financial

Donald Trump’s April 2025 "Liberation Day" tariffs sent markets into a tailspin, but stocks have since rebounded strongly, proving that knee-jerk reactions often create the best buying opportunities.

The smart money is already positioning for the next leg up. Don’t miss out on the recovery - check out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.

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