IVR

Invesco Mortgage Capital is a leveraged Agency-MBS REIT whose FY2025 results genuinely improved: net income rose 69.1% to $101M and diluted EPS doubled to $1.32, supported by the more accommodative rate environment described in the MD&A (FOMC cut the Fed Funds rate three times in 2025, the 2-year Treasury yield fell 78bps to 3.47%, and the curve steepened modestly). That backdrop is structurally favorable for a portfolio that funds long-duration MBS with short-term repo — the very 'net interest spread' dynamic management calls out as the dominant driver of results. A 6.0x P/E and 12.7% ROE on a stock at $7.87 screen as cheap.

That said, this is not a quality compounder. The Risk Factors lay out exactly why: borrowing costs reprice continuously through repo, hedging is 'highly complex and may produce volatile returns,' prepayment assumptions can break the hedge book, and 'spread risk' can force asset sales to preserve liquidity. The balance sheet shows the cost of being in this business across cycles — accumulated deficit of -$3.58B in retained earnings, total liabilities of $5.68B against just $798M of equity (7.12x), and a 34.9% YoY jump in shares outstanding diluting any per-share recovery. Cash fell 23.7% to $56M and operating cash flow declined 14.2%, even as reported earnings surged.