Compass Point Upgrades Capstead Mortgage (CMO) to Buy on Discount to Book

Compass Point upgraded Capstead Mortgage (NYSE: CMO) from Neutral to Buy with a price target of $14.00.

The firm comments, "Our price target represents a multiple of 1.05x estimated 3Q12 book value per share of $13.35 (up only modestly from $13.23 in 2Q12) and represents a current yield of 10.3%. At current valuations and post Annaly's (NLY - Buy, $17 PT) share repurchase announcement, we believe investors will re-focus attention on discounted mortgage REITs that have the potential to increase shareholder value through capital structure opportunities - namely share repurchases. Share repurchases are particularly attractive for mortgage REITs that trade at a significant discount to book value, face reinvestment ROEs below legacy portfolio ROEs and have not been frequent capital raisers. CMO meets all of these parameters and the company is one of only a handful to have executed a share repurchase program historically (and successfully to boot). Furthermore, as an internally managed REIT, the company does not face the direct conflict of interest between reducing potential fee income by reducing common equity outstanding and preserving shareholder value."

For an analyst ratings summary and ratings history on Capstead Mortgage click here. For more ratings news on Capstead Mortgage click here.

Shares of Capstead Mortgage closed at $12.48 yesterday.

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