FEDERAL AGRICULTURAL MORTGAGE CORPORATION (AGM): what the price requires

Generated: 2026-07-14 · Exported: 2026-07-17 · Source: https://boothcheck.com/report/AGM

Headline

Field	Value
Ticker	AGM
Company	FEDERAL AGRICULTURAL MORTGAGE CORPORATION
Current price	$202.33/sh
Composition	Farm & Ranch 37% / Corporate AgFinance 9% / Power & Utilities 6% / Broadband Infrastructure 5% / Renewable Energy 7% / Funding 34% / Investments 2%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Field	Value
Inversion basis	whole-company
Operating margin today	16.5%
Must persist for	10.9y
Multiple paid	126x operating income

Solve inputs: computed at a 7% cost of capital; growth searched up to the 25% self-funding ceiling; each 1pp moves the implied horizon ~2.8 years (computed at the 7% minimum rate; the CAPM rate 3.1% sits below it).

Reconcile: at the x-ray's 9.3% required return this reads ~16.7 years; the models below use their own rates.

How unusual the bet is: elevated (limited comparison data)

Reference	Value
sustained it ~10 years at this level	14%
implied end-window share	0%

Valuation X-Ray

The price is supported by asset-based and earnings-power and relative-multiple and growth-DCF value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Family	Median price/FV	Models	Reads
Asset	0.81x	4	justifies
Earnings	0.81x	2	justifies
Relative	0.93x	4	justifies
Growth	1.04x	2	expensive

Families that justify the price: Asset, Earnings, Relative, Growth

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 4.4%); the inversion above states its own rate.

Per-Model Detail (n=12)

Model	Family	FV	Price/FV	Applicable	Methodology
DCF Perpetual Growth	Growth	—	—	no	—
DCF Exit Multiple	Growth	$0.00	—	no	Negative/zero FCF or EBITDA — equity value floored at $0
Relative Valuation	Relative	$266.76	0.76x	yes	P/E 12x (static sector reference · 2026-04), scenarios: 10.0x / 12.0x / 14.0x (bear / base = reference held flat / bull), EV/EBITDA N/Ax
Simple DDM	Growth	—	—	no	—
Two-Stage DDM	Growth	$203.38	0.99x	yes	Stage 1: 9% for 5yr, Stage 2: 3.5% perpetual
Simple Excess Return	Asset	$214.68	0.94x	yes	BV/sh $157.21, ROE (TTM) 12.6%, ke 9.3%
Two-Stage Excess Return	Asset	$249.00	0.81x	yes	5yr excess ROE then converge to ke=9.3%
Discounted Future Market Cap	Growth	$186.47	1.09x	yes	Rev $0.4B, growth 12% (input: historical growth; tapered), Terminal P/S: 4.6x / 5.5x / 6.4x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair Value	Relative	$208.32	0.97x	yes	EPS $17.36, growth 9% (input: historical EPS growth), PEG=1.16 (Fair)
Margin Trajectory	Growth	—	—	no	—
Earnings Power Value	Earnings	—	—	no	—
Residual Income	Asset	$256.16	0.79x	yes	BV $157.21 + 5yr PV of (ROE (TTM) 12.6% − Kₑ 9.3%) × BV; BV grows 8.2%/yr
Graham Number	Asset	$247.80	0.82x	yes	√(22.5 × EPS $17.36 × BVPS $157.21) — Graham's conservative floor
EV/EBITDA Relative	Relative	—	—	no	—
FCF Yield	Earnings	$0.01	20233.00x	yes	FCF $221.9M / Kₑ 9.3% — zero-growth perpetuity (excluded from median)
SBC-Adj FCF Yield	Earnings	$0.01	20233.00x	yes	SBC-adj FCF $0.21B (FCF $0.22B − SBC $0.01B) capitalized at Kₑ (excluded from median)
Ben Graham Formula	Earnings	$378.93	0.53x	yes	EPS $17.36 × (8.5 + 2×8.8%) × (4.4 / 5.3%)
ROIC-Justified P/B	Asset	—	—	no	—
P/Sales Sector	Relative	$110.20	1.84x	yes	Revenue $0.40B × sector P/S 3.0x
PEG Fair Value	Relative	$228.43	0.89x	yes	EPS $17.36 × (PEG 1.5 × growth 8.8% (input: historical EPS growth)) → PE 13.2x
Earnings Yield	Earnings	$187.68	1.08x	yes	EPS $17.36 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations Multiple	Relative	—	—	no	—
Clinical Phase NPV	Growth	—	—	no	—
Merton	Asset	—	—	no	—
V5 Mechanical	—	—	—	no	—

Solvency

Field	Value
Net debt	$31.4b
Net debt / NOPAT (after-tax)	142.43x
Net debt / operating income (pre-tax)	117.88x
Share count CAGR (dilution)	0.1%
Burning cash	no

Interest expense is not separately reported in the latest filings, so interest coverage cannot be computed.

Bullet Takeaways

Farmer Mac is a government-sponsored enterprise that provides secondary-market financing for agricultural and rural-infrastructure lending, so it should be read as a financial institution, on book value and return on equity, not an operating multiple. At $185.46 the stock trades at roughly 1.2x book value of about $157 per share, against a return on equity near 12.6% and diluted EPS of $4.75 in Q1 2026.

The business is growing steadily. Q1 2026 set a record $34.8 billion of outstanding business volume, up 17%, net interest income rose 11% to $101.4 million, and net income climbed to $59.1 million. The company holds a 13.0% Tier 1 capital ratio and targets $50 to $55 billion of volume by 2030.

The valuation methods built for a financial company say the stock is cheap: the asset-based and relative methods land in the $200s against the $185 price. The dividend rose 7% to $1.60, the fifteenth straight annual increase. The watch item is credit, with delinquencies rising modestly in Farm & Ranch on input-cost and trade pressures.

Bull Case

Frame Farmer Mac by what it is, because the stage and structure determine how the numbers should be read. This is a mature, profitable, chartered financial institution, a government-sponsored enterprise whose mission is to provide a secondary market and liquidity for agricultural and rural lending, not an operating company to be valued on an EBIT multiple. Its statutory charter defines the assets it can hold: as the filing puts it, "Eligible Loans include obligations which are secured by a first lien mortgage on real estate used in agricultural production or processing" (FY2025 10-K, accession 0000845877-26-000014). That charter is the moat. Farmer Mac occupies a protected niche in US agricultural finance with a quasi-governmental role, a low cost of funds from its GSE status, and few direct competitors of scale, which is why it earns a steady mid-teens-to-low-teens return on equity through cycles.

The second pillar is the durable, broad-based growth in business volume. Q1 2026 set a record $34.8 billion of outstanding volume, up 17% year over year, with growth spread across Farm & Ranch, corporate AgFinance, power and utilities, broadband infrastructure, and renewable energy. Net interest income rose 11% to $101.4 million, net effective spread and core earnings rose 13%, and diluted EPS climbed to $4.75 from $4.01. The company has laid out a clear runway, targeting at least $40 billion of volume by 2028 and $50 to $55 billion by 2030, and the diversification into rural infrastructure (power, broadband, renewables) extends the addressable market well beyond traditional farm mortgages. For a spread lender, growing the balance sheet at low credit cost while holding the spread is the engine of compounding earnings.

The third pillar is the capital strength, the dividend record, and the valuation discount. Farmer Mac maintains a 13.0% Tier 1 capital ratio and liquidity covering close to 300 days, a conservative posture for a lender, and it raised its dividend 7% to $1.60 quarterly, the fifteenth consecutive annual increase. Read on the financial frame that suits it, the stock is inexpensive: book value per share is about $157 against the $185.46 price, just 1.2x book, while the excess-return and residual-income models land near $214 to $256, the relative P/E near $267, and the two-stage dividend model near $203, all above the price. A growing, well-capitalized, charter-protected lender trading near 1.2x book with a 12.6% ROE and a long dividend-growth record is the kind of value-financial setup the conservative methods consistently flag as cheap.

Bear Case

The regulatory and macro variable should open the bear case, because for a chartered agricultural lender the external forces, farm-economy stress, interest rates, and government policy, carry the most leverage over the outcome. Farmer Mac's borrowers are farmers and rural enterprises, and the farm economy is under pressure: high input costs and trade concerns are squeezing agricultural incomes, and that is already showing up in the credit metrics, with rising 90-day delinquencies and substandard assets in the Farm & Ranch segment. The filing defines the exposure plainly, counting "loans 90 days or more past due, as well as loans in foreclosure and non-performing loans where the borrower is in bankruptcy" and warning that "a prolonged period of economic stress, including a broader economic downturn or recession, could ensue" (FY2025 10-K, accession 0000845877-26-000014). A spread lender's earnings can be erased by a credit cycle, and the current direction of delinquencies is the wrong way.

The second risk is the one inherent to any GSE: the charter that protects Farmer Mac is also a political asset that Congress and regulators control. The company's low cost of funds, its mission scope, and its capital requirements all flow from federal policy, and any change to GSE oversight, capital rules, or the perceived government backstop could raise its funding costs or constrain its growth. This is a tail risk that an ordinary bank does not carry in the same form: the same government relationship that grants the moat can reshape it. Combined with the leverage inherent in a lending balance sheet, where tens of billions of debt fund the loan book, even small changes in funding spreads or capital treatment move the economics.

The third issue is interest-rate and spread sensitivity layered on top of credit. Farmer Mac earns a net effective spread between its funding cost and the yield on its assets, and that spread is sensitive to the shape of the yield curve and to competition for ag lending. A flatter curve, a rise in funding costs, or aggressive pricing from farm-credit-system competitors would compress the spread that drives earnings. The stock's apparent cheapness on the financial frame assumes the 12.6% ROE and the low credit losses persist; if the farm-economy stress deepens into a genuine credit cycle, provisions rise, the ROE falls, and the discount to book narrows for the wrong reason. The generic operating-income inversion that reads the stock as paying 125x operating income is a mis-frame for a financial company and should be disregarded, but the underlying caution it gestures at, that the favorable current returns may not persist through a farm downturn, is the real bear case.

Valuation

Farmer Mac must be valued as a financial institution, which means book value and return on equity, not the operating multiple the generic inversion reports. That inversion reads the price as paying about 125x operating income, an artifact of treating a lender's funding debt and net interest income as if they were a corporate operating structure; it should be set aside. On the financial frame the picture is straightforward: book value per share is about $157, return on equity is near 12.6%, and trailing EPS is about $17.36, so the $185.46 price is roughly 1.2x book and a low-teens multiple of earnings.

On that frame the model families that fit a financial company say the stock is cheap. The simple and two-stage excess-return models land near $214 to $249, residual income near $256, the Graham number near $248, the relative P/E near $267, and the two-stage dividend model near $203, all above the price. The earnings-yield method lands near $188, essentially at the price. The FCF-yield and EV/EBITDA outputs are meaningless for a lender and are correctly near zero or skipped. The weight of the appropriate methods points to a fair value comfortably above today's price.

The practical read is that Farmer Mac is a growing, well-capitalized, charter-protected lender trading at a modest premium to book with a long dividend-growth record, and the conservative financial methods flag it as undervalued. A reader is underwriting the persistence of the low-teens ROE and disciplined credit through the current farm-economy stress.

Catalysts

Farmer Mac reported Q1 2026 results in early May 2026 that lifted the stock, with record outstanding business volume of $34.8 billion (up 17%), net interest income up 11% to $101.4 million, net income of $59.1 million, and diluted EPS of $4.75 versus $4.01. Net effective spread and core earnings rose 13%. The next quarterly print is the key checkpoint on whether volume growth holds and, importantly, how credit metrics trend in the Farm & Ranch book.

The growth catalyst is the volume runway and diversification. Management targets at least $40 billion of business volume by 2028 and $50 to $55 billion by 2030, with growth spread across farm and ranch, corporate agrifinance, power and utilities, broadband infrastructure, and renewable energy. Continued expansion into rural infrastructure is the structural catalyst that extends the addressable market beyond traditional farm mortgages.

Capital return and governance round out the picture: the board raised the dividend 7% to $1.60 quarterly, the fifteenth consecutive annual increase, against a 13.0% Tier 1 capital ratio, and a new CEO, Carpenter, was set to start July 1, 2026. The swing factors are the farm-economy credit cycle, where rising delinquencies bear watching, and interest-rate and spread dynamics. Keefe Bruyette kept an Outperform rating while trimming its target to $215, above the current price, reflecting solid fundamentals against the credit-trend caution.

Peer Cohorts (Per Segment, With Filing Citations)

Farm & Ranch / Corporate AgFinance +5 more (reported)

• FNMA (FEDERAL NATIONAL MORTGAGE ASSOCIATION FANNIE MAE)
• (no filing in the citation store)
• SLM (SLM Corp)
• (no filing in the citation store)
• NNI (NELNET, INC.)
• (no filing in the citation store)
• CACC (CREDIT ACCEPTANCE CORP)
• (no filing in the citation store)
• LC (LendingClub Corporation)
• (no filing in the citation store)

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.