Is Two Harbors Investment Corp. overvalued or undervalued?

As of 29 January 2025, the valuation grade for Two Harbors Investment Corp. has moved from risky to very attractive. The company appears to be undervalued given its significant dividend yield of 1174.96% and a price-to-book value of 0.52, which suggests that the stock is trading well below its intrinsic value. The P/E ratio stands at 80, which is notably high compared to peers like LTC Properties, Inc. with a P/E of 17.18 and Getty Realty Corp. at 21.89, indicating a potential overvaluation relative to earnings.
In addition to the P/E ratio, Two Harbors has an EV to EBITDA of 0.65, which is competitive when compared to peers, and a remarkable ROCE of 43.46%. Despite the high P/E ratio, the overall valuation metrics suggest that the stock is undervalued, especially in light of its strong performance indicators. Notably, the company's recent stock performance has lagged behind the S&P 500, with a year-to-date return of -12.34% compared to the S&P 500's 2.44%, reinforcing the notion that the market may not fully recognize the company's underlying value.