What happened

The stock market continued its post-election rally on Thursday, with all major market averages higher by at least 2% as of 3:25 p.m. EST. However, mortgage real estate investment trust MFA Financial (NYSE:MFA) was a big outperformer, up by about 6.2% at that point in the trading day after being up by as much as 12% earlier in the session.

So what

The short explanation for that pop was that MFA's third-quarter earnings report handily surpassed analysts' expectations. The mortgage REIT earned $0.17 per share, and while that was less than the $0.20 per share it generated in the same quarter a year ago, it was more than triple the consensus forecast of $0.05 per share.

Miniature house and calculator sitting next to money with house keys on top.

Image source: Getty Images.

More importantly, MFA's business seems to be stabilizing, and management seems far more confident about the company's financial position than it was in the second quarter. The company was able to reinstate the dividend on its preferred stock and pay all accrued unpaid amounts. And the company repaid in full the $481 million term loan it took out in June, which significantly lowered its interest expenses.

Now what

At the end of the third quarter, MFA's book value stood at $4.61 per share, so even after Thursday's move, the stock -- at a price in the neighborhood of $3.10 a share -- is still trading for a substantial discount to the value of its assets. MFA CEO Craig Knutson said in the earnings press release that the quarter's results "were the beginning of what we hope is a return to normal in this tumultuous year of 2020." If his cautious optimism proves correct, there could be significantly more upside potential for the stock ahead.

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