DCF Tool

TWO

Two Harbors Investment Corp – Other Financial Vehicles
Two Harbors Investment Corp. is a Maryland corporation focused on investing, financing and managing residential mortgage-backed securities (RMBS) and related investments. Its objective is to provide attractive risk-adjusted returns to its stockholders over the long term, primarily through dividends and secondarily through capital appreciation. The Company selectively acquires and manages an investment portfolio of its target assets, which is constructed to generate attractive returns through market cycles. The Company focuses on security selection and implement a relative value investment approach across various sectors within the mortgage market. Its target assets include the following: Agency RMBS (which includes inverse interest-only Agency securities classified as Agency Derivatives for purposes of U.S. GAAP), meaning RMBS whose principal and interest payments are guaranteed by the Government National Mortgage Association (or Ginnie Mae), the Federal National Mortgage Association (or Fannie Mae), or the Federal Home Loan Mortgage Corporation (or Freddie Mac); Mortgage servicing rights (MSR); and Other financial assets comprising approximately 5% to 10% of the portfolio.
Analysis Results
Intrinsic Value $0.01
Latest Price $16.14
Relative Value 113448% overvalued
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Cash Flow (Billions)
Analysis Parameters
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Analysis Details
Growth Rate Projection

An exponential growth model was fit to the past cash flow data, giving more weight to more recent years. This model determined a growth rate estimate of -56.3%.

Weighted Average Cost of Capital (WACC)

The calculated WACC is 4.6%. This value is used as the default discount rate.

Value of Future Flows

Assuming a growth rate of -56.3%, the cash flows for the next 5 years are projected.

The present value of each year's flow is adjusted to present value using the discount rate.

Year Future flow (billion) Present value (billion)
2022 0.0005 0.000478
2023 0.000218 0.0002
2024 9.54e-05 8.34e-05
2025 4.17e-05 3.48e-05
2026 1.82e-05 1.46e-05
Terminal Value

Assuming the company was sold after the projection period at an exit multiple of 30, the terminal value of the company would be 0.000547 billion. This corresponds to a present value of 0.000417 billion.

Intrinsic Value Per Share

The total present value of the projected cash flows is 0.00081 billion. Adding in the terminal value gives a total present value of 0.00123 billion.

There are presently 86.4 million outstanding shares, so the intrinsic value per share is 0.01.

Financial Statements

The following data was to determine the past cash flows.

Current Assets 10,781,986,000
Current Cash 0
Current Liabilities 9,239,888,000
Current Debt 396,776,000
Non-Cash Working Capital (NCWC) 1,938,874,000
Change in NCWC -34,556,000
EBIT 191,419,000
Tax Provision 4,192,000
Depreciation and Amortization 0
Capital Expenditure 0
Unlevered Free Cash Flow 152,671,000
Current Assets 17,921,383,000
Current Cash 0
Current Liabilities 16,343,562,000
Current Debt 395,609,000
Non-Cash Working Capital (NCWC) 1,973,430,000
Change in NCWC -2,013,771,000
EBIT -1,660,117,000
Tax Provision -35,688,000
Depreciation and Amortization 0
Capital Expenditure 0
Unlevered Free Cash Flow -3,673,888,000
Current Assets 34,473,556,000
Current Cash 0
Current Liabilities 30,880,857,000
Current Debt 394,502,000
Non-Cash Working Capital (NCWC) 3,987,201,000
Change in NCWC 1,308,915,000
EBIT 310,402,000
Tax Provision -13,560,000
Depreciation and Amortization 0
Capital Expenditure 0
Unlevered Free Cash Flow 1,619,317,000
Current Assets 28,516,998,000
Current Cash 0
Current Liabilities 25,838,712,000
Current Debt 0
Non-Cash Working Capital (NCWC) 2,678,286,000
Change in NCWC -145,287,000
EBIT 92,474,000
Tax Provision 41,823,000
Depreciation and Amortization 0
Capital Expenditure 0
Unlevered Free Cash Flow -52,813,000
Current Assets 24,038,419,000
Current Cash 0
Current Liabilities 21,214,846,000
Current Debt 0
Non-Cash Working Capital (NCWC) 2,823,573,000
Change in NCWC 65,926,000
EBIT 297,757,000
Tax Provision -10,482,000
Depreciation and Amortization 969,000
Capital Expenditure -629,000
Unlevered Free Cash Flow 364,023,000
Current Assets 19,447,465,000
Current Cash 0
Current Liabilities 16,689,818,000
Current Debt 0
Non-Cash Working Capital (NCWC) 2,757,647,000
Change in NCWC -328,578,000
EBIT 368,571,000
Tax Provision 12,303,000
Depreciation and Amortization 1,283,000
Capital Expenditure -338,000
Unlevered Free Cash Flow 28,534,376
Current Assets 14,069,049,000
Current Cash 0
Current Liabilities 10,982,824,000
Current Debt 0
Non-Cash Working Capital (NCWC) 3,086,225,000
Change in NCWC -480,264,000
EBIT 475,720,000
Tax Provision -16,490,000
Depreciation and Amortization 1,362,000
Capital Expenditure -930,000
Unlevered Free Cash Flow -4,112,000
Current Assets 20,573,283,000
Current Cash 0
Current Liabilities 17,006,794,000
Current Debt 0
Non-Cash Working Capital (NCWC) 3,566,489,000
Change in NCWC 75,711,000
EBIT 93,401,000
Tax Provision -73,738,000
Depreciation and Amortization 1,616,000
Capital Expenditure 0
Unlevered Free Cash Flow 170,728,000
Current Assets 16,762,947,000
Current Cash 0
Current Liabilities 13,272,169,000
Current Debt 0
Non-Cash Working Capital (NCWC) 3,490,778,000
Change in NCWC 387,490,000
EBIT 659,451,000
Tax Provision 84,411,000
Depreciation and Amortization 1,674,000
Capital Expenditure 0
Unlevered Free Cash Flow 964,204,000
Current Assets 16,466,655,000
Current Cash 0
Current Liabilities 13,363,367,000
Current Debt 0
Non-Cash Working Capital (NCWC) 3,103,288,000
Change in NCWC 2,006,476,000
EBIT 245,197,000
Tax Provision -42,219,000
Depreciation and Amortization 1,732,000
Capital Expenditure -293,745,000
Unlevered Free Cash Flow 1,959,660,000

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