ARMOUR Residential REIT, Inc. (ARR) Discounted Future Market Cap

ARMOUR Residential REIT, Inc.

ARR (NYSE)

(%)

Valuation
ARMOUR Residential REIT, Inc. Discounted Future Market Cap

"""
    Model: Discounted Future Market Cap

# Render model description
model.render_description(r"""
## Discounted Future Market Cap

This model estimates the intrinsic value of a common share by projecting the Future Market Capitalization using the estimated PE Ratio and then discounting it to the Present using an Annual Required Rate of Return.
""")

# Initialize assumptions
assumptions.init({
    "data": {
        "%discount_rate": None,
        "beta": data.get("profile:beta", default=1),
        "%risk_free_rate": data.get("treasury:year10"),
        "%market_premium": data.get("risk:totalEquityRiskPremium"),
        "pe_ratio": data.get("quote:close") / data.get("income:eps"),
        "%revenue_growth_rate": None,
        "%net_income_margin": None,
        "historical_years": 10,
        "projection_years": 5,
    },
    "hierarchies": [{
        "parent": "%discount_rate",
        "children": ["beta", "%risk_free_rate", "%market_premium"]
    }]
})

# Calculate cost of equity
cost_of_equity = assumptions.get("%risk_free_rate") + assumptions.get("beta") * assumptions.get("%market_premium")
assumptions.set("%discount_rate", cost_of_equity)

# Compute metrics
data.compute({
    "%grossMargin": "income:grossProfit / income:revenue",
    "%operating_margin": "income:operatingIncome / income:revenue",
    "%netMargin": "income:netIncome / income:revenue",
    "%revenueGrowthRate": "function:growth:income:revenue",
    "%netIncomeGrowthRate": "function:growth:income:netIncome",
    "%totalStockholdersEquityGrowthRate": "function:growth:balance:totalStockholdersEquity",

# Calculating NOPAT (Net Operating Profit After Taxes)
    "%taxRate": "income:incomeTaxExpense / income:incomeBeforeTax",
    "incomeTax": "income:operatingIncome * %taxRate",
    "nopat": "income:operatingIncome - incomeTax",

# Calculating Invested Capital
    "investedCapital": [
        "balance:totalNonCurrentAssets", "-", "balance:cashAndCashEquivalents", "+",
        "balance:totalCurrentAssets", "-", "balance:totalCurrentLiabilities"
    ],
    "%roic": "nopat / investedCapital",
})

assumptions.set("%net_income_margin",
                data.average(f"%netMargin:{-assumptions.get('historical_years')}->0"))  # Historical average
assumptions.set("%revenue_growth_rate",
                data.average(f"%revenueGrowthRate:{-assumptions.get('historical_years')}->0"))  # Historical average

# Calculate a linear regression for forecasting revenues
data.compute({
    "linearRegressionRevenue": f"function:linear_regression:income:revenue start:{-assumptions.get('historical_years')}",
}, forecast=assumptions.get("projection_years"))

# Compute forecasted values and ratios
data.compute({
    "income:revenue": f"function:compound:{data.get('linearRegressionRevenue:1')} rate:{assumptions.get('%revenue_growth_rate')} offset:-1",
    "%revenueGrowthRate": "function:growth:income:revenue",
    "income:netIncome": f"income:revenue * {assumptions.get('%net_income_margin')}",
}, forecast=assumptions.get("projection_years"))

projected_revenue = data.get("revenue")
projected_net_income = data.get(f"income:netIncome:{assumptions.get('projection_years')}")

shares_outstanding = data.get("income:weightedAverageShsOut")
future_market_cap = assumptions.get("pe_ratio") * projected_net_income
discounted_future_market_cap = future_market_cap / (
            (1 + assumptions.get("%discount_rate")) ** assumptions.get("projection_years"))

stock_value = discounted_future_market_cap / shares_outstanding

# Set the final value
model.set_final_value({
    "value": stock_value,
    "units": "$"
})

# Render results
model.render_results([
    [stock_value, "Present Value", "$"],
    [projected_net_income, "Estimated net income", "$"],
    [future_market_cap, "Estimated market capitalization", "$"],
    [discounted_future_market_cap, "Market capitalization discounted to present", "$"],
    [shares_outstanding, "Shares Outstanding", "#"],
    [data.get("income:eps"), "Earnings Per Share (EPS)", "$"],
    [data.get("quote:close"), "Market Price", "$"],
    [data.get("ratio:priceEarningsRatio"), "Price to Earnings (PE) Ratio", "#"]
])

# Render chart
model.render_chart({
    "data": {
        "income:revenue": "Revenue",
        "income:netIncome": "Net Income",
        "linearRegressionRevenue": "Linear Regression Revenue"
    },
    "start": -assumptions.get("historical_years"),
    "end": "*",
    "properties": {
        "title": "Historical and forecasted data",
        "number_format": "M",
        "set_editable": [
            "income:revenue",
            "income:netIncome"
        ],
        "hidden_keys": ["linearRegressionRevenue"]
    }
})

# Render table for estimated future values
model.render_table({
    "data": {
        "income:revenue": "Revenue",
        "%revenueGrowthRate": "Revenue Growth Rate",
        "income:netIncome": "Net Income",
    },
    "start": -1,
    "end": "*",
    "properties": {
        "title": "Estimated Future Values",
        "order": "ascending",
        "number_format": "M"
    }
})

# Render historical values table
model.render_table({
    "data": {
        "income:revenue": "Revenue",
        "income:costOfRevenue": "Cost of Revenue",
        "income:grossProfit": "Gross Profit",
        "%grossMargin": "Gross Margin",
        "income:operatingIncome": "Operating Income",
        "%operating_margin": "Operating Margin",
        "income:netIncome": "Net Income",
        "%netMargin": "Net Margin",
    },
    "start": -assumptions.get("historical_years"),
    "end": 0,
    "properties": {
        "title": "Historical Values",
        "display_averages": True,
        "order": "descending",
        "number_format": "M"
    },
})

# Render historical growth rates table
model.render_table({
    "data": {
        "income:revenue": "Revenue",
        "%revenueGrowthRate": "Revenue Growth Rate",
        "income:netIncome": "Net Income",
        "%netMargin": "Net Margin",
        "%netIncomeGrowthRate": "Net Income Growth Rate",
        "balance:totalStockholdersEquity": "Stockholders Equity",
        "%totalStockholdersEquityGrowthRate": "Equity Growth Rate",
        "%roic": "Return on Invested Capital (ROIC)",
        "nopat": "After-tax Operating Income",
        "%taxRate": "Income Tax Rate",
        "investedCapital": "Invested Capital",
    },
    "start": -assumptions.get("historical_years"),
    "end": 0,
    "properties": {
        "title": "Historical Growth Rates",
        "display_averages": True,
        "order": "descending",
        "number_format": "M"
    },
})

# Set description for assumptions
assumptions.set_description({
    "%discount_rate": r"""
        ## Discount Rate

`Discount Rate` = `Cost of Equity` = `Risk Free Rate` + `Beta` * `Market Premium`

The cost of equity is the theoretical rate of return that an equity investment should generate. It is calculated using the CAPM formula.

[Read More](https://www.investopedia.com/terms/c/costofequity.asp#mntl-sc-block_1-0-20)
    """,

"beta": r"""
        ## Beta

Beta is a value that measures the price fluctuations (volatility) of a stock with respect to fluctuations in the overall stock market.
    """,

"%risk_free_rate": r"""
        ## Risk-Free Rate

The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time.
        By default, it is equal to the current yield of the U.S. 10 Year Treasury Bond.
    """,

"%market_premium": r"""
        ## Market Premium

Market risk premium represents the excess returns over the risk-free rate that investors expect for taking on the incremental risks connected to the equities market.
    """,

"pe_ratio": r"""
        ## Price to Earnings (PE) Ratio

Estimated Price to Earnings (PE) Ratio at the end of the projection period.

`Future Market Cap` = `PE Ratio` * `Projected Net Income`
    """,

"%revenue_growth_rate": r"""
        ## Revenue Growth Rate

The annual revenue growth rate is applied to projected revenue starting from the second projection year onward.
    """,

"%net_income_margin": r"""
        ## Net Income Margin

Net Income expressed as a percentage of Revenue.
    """,

"historical_years": r"""
        ## Historical Years

The number of historical years used to calculate averages for historical data.
    """,

"projection_years": r"""
        ## Projection Years

The number of years for projecting the analysis into the future.
    """,
})

print("End of model.")

Estimated Value

USD

Market Price USD

* Values are not guaranteed, please do your own
research before making investment decisions.

Discounted Future Market Cap

Interactive Assumptions

Discount Rate Discount Rate `Discount Rate` = `Cost of Equity` = `Risk Free Rate` + `Beta` * `Market Premium` The cost of equity is the theoretical rate of return that an equity investment should generate. It is calculated using the CAPM formula. Read More	%
↳ Beta Beta Beta is a value that measures the price fluctuations (volatility) of a stock with respect to fluctuations in the overall stock market.	#
↳ Risk Free Rate Risk-Free Rate The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time. By default, it is equal to the current yield of the U.S. 10 Year Treasury Bond.	%
↳ Market Premium Market Premium Market risk premium represents the excess returns over the risk-free rate that investors expect for taking on the incremental risks connected to the equities market.	%
Pe Ratio Price to Earnings (PE) Ratio Estimated Price to Earnings (PE) Ratio at the end of the projection period. `Future Market Cap` = `PE Ratio` * `Projected Net Income`	#
Revenue Growth Rate Revenue Growth Rate The annual revenue growth rate is applied to projected revenue starting from the second projection year onward.	%
Net Income Margin Net Income Margin Net Income expressed as a percentage of Revenue.	%
Historical Years Historical Years The number of historical years used to calculate averages for historical data.	#
Projection Years Projection Years The number of years for projecting the analysis into the future.	#

Results
Present Value	-553.7 USD
Estimated net income	1.84 Bil. USD
Estimated market capitalization	-67.38 Bil. USD
Market capitalization discounted to present	-41.65 Bil. USD
Shares Outstanding	75.22 Mil.
Earnings Per Share (EPS)	-0.46 USD
Market Price	16.81 USD
Price to Earnings (PE) Ratio	-801.3

Historical and forecasted data

In Millions of USD

{"sectionId": "section-chart-1", "sectionType": "chart", "title": "Historical and forecasted data", "dates": [2015, 2016, 2017, 2018, 2019, 2020, 2021, 2022, 2023, 2024, 2025, 2026, 2027, 2028, 2029], "series": [{"label": "Revenue", "mappingKey": "income:revenue", "data": [5.74, -99.69, 124.7, -68.92, -211.8, -213.2, 19.17, -225.9, 449.7, 563.4, {"y": 280.1, "oy": 280.1, "e": true, "c": 2025, "g": -50.28, "og": -50.28}, {"y": -703.7, "oy": -703.7, "e": true, "c": 2026, "g": -351.2, "og": -351.2}, {"y": 1767, "oy": 1767, "e": true, "c": 2027, "g": -351.2, "og": -351.2}, {"y": -4440, "oy": -4440, "e": true, "c": 2028, "g": -351.2, "og": -351.2}, {"y": 11154, "oy": 11154, "e": true, "c": 2029, "g": -351.2, "og": -351.2}], "dataType": ".", "numberFormat": "M", "hidden": false}, {"label": "Net Income", "mappingKey": "income:netIncome", "data": [-31.2, -45.52, 181.2, -106.0, -249.9, -215.1, 15.36, -229.9, -67.92, -14.39, {"y": 46.31, "oy": 46.31, "e": true, "c": 2025, "g": -421.7, "og": -421.7}, {"y": -116.3, "oy": -116.3, "e": true, "c": 2026, "g": -351.2, "og": -351.2}, {"y": 292.2, "oy": 292.2, "e": true, "c": 2027, "g": -351.2, "og": -351.2}, {"y": -734.0, "oy": -734.0, "e": true, "c": 2028, "g": -351.2, "og": -351.2}, {"y": 1843, "oy": 1843, "e": true, "c": 2029, "g": -351.2, "og": -351.2}], "dataType": ".", "numberFormat": "M", "hidden": false}, {"label": "Linear Regression Revenue", "mappingKey": "linearRegressionRevenue", "data": [-166.8, -122.1, -77.41, -32.72, 11.98, 56.67, 101.4, 146.1, 190.7, 235.4, 280.1, 324.8, 369.5, 414.2, 458.9], "dataType": ".", "numberFormat": "M", "hidden": true}], "editableDates": {"2025": 36, "2026": 37, "2027": 38, "2028": 39, "2029": 40}, "properties": {"number_format": "M", "display_table": true}, "width": "full"}

Edit Chart Values	2025	2026	2027	2028	2029

↳ Growth Rate

Estimated Future Values

amounts of USD except for #	2024	LTM	2025	2026	2027	2028	2029
Revenue	563.4	57.16	280.1	-703.7	1,768	-4,440	11,154
Revenue Growth Rate	25.29%	-89.85%	-50.28%	-351.2%	-351.2%	-351.2%	-351.2%
Net Income	-14.39	-1.58	46.31	-116.3	292.2	-734	1,844

Historical Values

amounts of USD except for #	Average	LTM	2024	2023	2022	2021	2020	2019	2018	2017	2016	2015
Revenue	36.4	57.16	563.4	449.7	-225.9	19.17	-213.2	-211.8	-68.92	124.7	-99.69	5.74
Cost of Revenue	104.3	177.5	524.1	31.59	232.2	22.51	22.21	29.57	27.25	26.58	26.07	27.29
Gross Profit	-69.92	79	39.26	-24.37	-458.1	-3.34	-44.41	-211.8	-96.17	98.15	-125.8	-21.55
Gross Margin	37.75%	138.2%	6.97%	-5.42%	202.8%	-17.41%	20.83%	100%	139.5%	78.69%	126.2%	-375.1%
Operating Income	-25.69	248.5	1.39	-60.9	-121.1	21.16	-215.1	-249.9	-105.6	275.7	-49.09	-27.65
Operating Margin	67.86%	434.7%	0.246%	-13.54%	53.62%	110.4%	100.9%	118%	153.2%	221%	49.24%	-481.3%
Net Income	-69.55	-1.58	-14.39	-67.92	-229.9	15.36	-215.1	-249.9	-106	181.2	-45.52	-31.2
Net Margin	16.52%	-2.76%	-2.56%	-15.1%	101.8%	80.14%	100.9%	118%	153.7%	145.2%	45.66%	-543.3%

Historical Growth Rates

amounts of USD except for #	Average	LTM	2024	2023	2022	2021	2020	2019	2018	2017	2016	2015
Revenue	36.4	57.16	563.4	449.7	-225.9	19.17	-213.2	-211.8	-68.92	124.7	-99.69	5.74
Revenue Growth Rate	-351.2%	-89.85%	25.29%	-299.1%	-1,278%	-109%	0.669%	207.3%	-155.3%	-225.1%	-1,836%	-104.1%
Net Income	-69.55	-1.58	-14.39	-67.92	-229.9	15.36	-215.1	-249.9	-106	181.2	-45.52	-31.2
Net Margin	16.52%	-2.76%	-2.56%	-15.1%	101.8%	80.14%	100.9%	118%	153.7%	145.2%	45.66%	-543.3%
Net Income Growth Rate	-228.5%	-89.04%	-78.81%	-70.46%	-1,597%	-107.1%	-13.92%	135.8%	-158.5%	-498%	45.86%	-82.57%
Stockholders Equity	1,249	1,704	1,361	1,271	1,112	1,143	938.3	1,437	1,125	1,326	1,092	1,225
Equity Growth Rate	2.19%	25.15%	7.1%	14.28%	-2.68%	21.82%	-34.69%	27.67%	-15.14%	21.43%	-10.86%	-29.96%
Return on Invested Capital (ROIC)	-1,077%	-11,840%	0.251%	-3.85%	-2.25%	0.116%	-2.17%	-1.11%	-0.863%	-0.161%	-0.076%	-0.056%
After-tax Operating Income	-751.4	-7,366	1.39	-60.9	-184.7	5.36	-224.9	-265.5	-122.6	-24.17	-9.86	-13.84
Income Tax Rate	366.4%	3,064%	0%	0%	-52.54%	74.68%	-4.55%	-6.26%	-16.07%	108.8%	79.92%	49.94%
Invested Capital	10,583	62.22	551.3	1,583	8,221	4,612	10,365	23,883	14,211	14,971	13,027	24,931