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1. Commentary

Finance of America Companies Inc. (FOA) experienced a mixed financial performance in 2024. While the company achieved a net income from continuing operations, a significant improvement from the loss in the previous year, total expenses remained high, offsetting some of the gains. Revenue increased, driven by net origination gains, but fair value changes and non-funding interest expenses impacted overall profitability. The company’s strategic focus on reverse mortgage origination is evident, but challenges remain in managing expenses and navigating market fluctuations.

2. Financial Ratio and Metric Analysis

Profitability

• Gross Profit Margin:
  • Metric: Not directly calculable from the provided data. The data focuses on net portfolio interest income and other income/expenses, rather than cost of goods sold.
• Operating Profit Margin:
  • Metric: (Net Income (Loss) from Continuing Operations Before Income Taxes) / Total Revenues = $42,816 / $338,171 = 12.66%
• Net Profit Margin:
  • Metric: (Net Income (Loss) from Continuing Operations) / Total Revenues = $40,418 / $338,171 = 11.95%
• Return on Assets (ROA):
  • Metric: Net Income / Total Assets = $35,691 / $29,156,490 = 0.12%
• Return on Equity (ROE):
  • Metric: Net Income Attributable to Controlling Interest / Total Equity = $15,488 / $315,664 = 4.91%
• Earnings Per Share (EPS) – Basic:
  • Metric: Net income (loss) from continuing operations attributable to controlling interest / Basic weighted average shares outstanding = $17,496 / 9,850,903 = $1.78
• Earnings Per Share (EPS) – Diluted:
  • Metric: If-converted method net income (loss) from continuing operations / Diluted weighted average shares outstanding = $31,756 / 23,406,233 = $1.36

Liquidity

• Current Ratio:
  • Metric: Current Assets / Current Liabilities. Need to determine current portions of assets and liabilities. Based on available data, this is difficult to calculate precisely. A rough estimate, considering cash, restricted cash, and some other assets as current, and using “Payables and other liabilities” as a proxy for current liabilities: ($47,383 + $254,585 + a portion of other assets) / $137,953. This is likely an *underestimate* of the true current ratio.
• Quick Ratio (Acid-Test Ratio):
  • Metric: (Current Assets – Inventory) / Current Liabilities. Since inventory is not applicable, and using the same rough estimate as above, this would be similar to the Current Ratio, but potentially excluding some less liquid “other assets.”
• Cash Ratio:
  • Metric: (Cash and Cash Equivalents) / Current Liabilities = $47,383 / $137,953 = 0.34

Solvency/Leverage

• Debt-to-Equity Ratio:
  • Metric: Total Liabilities / Total Equity = $28,840,826 / $315,664 = 91.37
• Debt-to-Assets Ratio:
  • Metric: Total Liabilities / Total Assets = $28,840,826 / $29,156,490 = 98.91%
• Interest Coverage Ratio (Times Interest Earned):
  • Metric: Earnings Before Interest and Taxes (EBIT) / Interest Expense. EBIT = Net Income + Income Tax Expense + Interest Expense = $35,691 + $2,398 + $1,637,286 = $1,675,375. Interest Coverage Ratio = $1,675,375 / $1,637,286 = 1.02

Activity/Efficiency

• Inventory Turnover:
  • Metric: Not applicable as the company is not primarily engaged in selling physical inventory.
• Days Sales Outstanding (DSO):
  • Metric: Not directly applicable. This metric is more relevant for companies with significant accounts receivable from sales.
• Days Payable Outstanding (DPO):
  • Metric: Not directly applicable. This metric is more relevant for companies with significant purchases on credit.
• Asset Turnover:
  • Metric: Total Revenues / Total Assets = $338,171 / $29,156,490 = 0.01

Valuation

• Price-to-Earnings Ratio (P/E):
  • Metric: Stock Price / EPS. Using the diluted EPS from continuing operations ($1.36) and the stock price ($20.82), P/E = $20.82 / $1.36 = 15.31
• Price-to-Book Ratio (P/B):
  • Metric: Market Cap / Book Value of Equity. Market Cap = Shares Outstanding * Stock Price = 9,934,449 * $20.82 = $206,838,040. Book Value of Equity = $315,664,000. P/B = $206,838,040 / $315,664,000 = 0.66
• Price-to-Sales Ratio (P/S):
  • Metric: Market Cap / Total Revenues. Market Cap = $206,838,040. Total Revenues = $338,171,000. P/S = $206,838,040 / $338,171,000 = 0.61
• Enterprise Value to EBITDA (EV/EBITDA):
  • Metric: EV / EBITDA. EV = Market Cap + Total Debt – Cash. Total Debt (approximated by total liabilities) = $28,840,826,000. Cash = $47,383,000. EV = $206,838,040 + $28,840,826,000 – $47,383,000 = $28,900,281,040. EBITDA (approximated by Adjusted EBITDA) = $59,695,000. EV/EBITDA = $28,900,281,040 / $59,695,000 = 484.12

Growth Rates

• Revenue Growth:
  • Metric: (Current Year Revenue – Prior Year Revenue) / Prior Year Revenue = ($338,171 – $234,250) / $234,250 = 44.37%
• Net Income Growth:
  • Metric: (Current Year Net Income – Prior Year Net Income) / Prior Year Net Income = ($35,691 – (-$218,158)) / (-$218,158) = -116.36%
• EPS Growth:
  • Metric: (Current Year EPS – Prior Year EPS) / Prior Year EPS = ($1.36 – (-$7.48)) / (-$7.48) = -118.18%

Other Relevant Metrics

• Adjusted EBITDA:
  • Metric: $59,695 (2024) vs. $(77,210) (2023). Adjusted EBITDA is a non-GAAP metric used by the company to present its financial performance. It starts with net income (loss) from continuing operations and adds back items such as changes in fair value, amortization/impairment of intangibles, equity-based compensation, interest expense on non-funding debt, and certain non-recurring costs. The company uses this metric to provide a clearer picture of its operating performance, excluding items that may not be indicative of its core business. While Adjusted EBITDA can be useful, it’s important to consider that it is a non-GAAP measure and may not be directly comparable to similar metrics used by other companies. The adjustments made to arrive at Adjusted EBITDA should be carefully scrutinized to ensure they are reasonable and do not obscure important information about the company’s financial performance.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️