Safeguard Scientifics (NYSE: SFE) and Arlington Asset Investment Corp (NYSE:AI) are both small-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their dividends, institutional ownership, earnings, valuation, profitabiliy, analyst recommendations and risk.

Risk & Volatility

Safeguard Scientifics has a beta of 1.3, suggesting that its stock price is 30% more volatile than the S&P 500. Comparatively, Arlington Asset Investment Corp has a beta of 1.15, suggesting that its stock price is 15% more volatile than the S&P 500.

Valuation & Earnings

This table compares Safeguard Scientifics and Arlington Asset Investment Corp’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Safeguard Scientifics N/A N/A -$18.08 million ($1.63) -7.58
Arlington Asset Investment Corp $53.14 million 6.13 -$4.73 million ($0.20) -68.90

Arlington Asset Investment Corp has higher revenue and earnings than Safeguard Scientifics. Arlington Asset Investment Corp is trading at a lower price-to-earnings ratio than Safeguard Scientifics, indicating that it is currently the more affordable of the two stocks.

Dividends

Arlington Asset Investment Corp pays an annual dividend of $2.20 per share and has a dividend yield of 16.0%. Safeguard Scientifics does not pay a dividend. Arlington Asset Investment Corp pays out -1,100.0% of its earnings in the form of a dividend.

Profitability

This table compares Safeguard Scientifics and Arlington Asset Investment Corp’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Safeguard Scientifics N/A -15.99% -11.93%
Arlington Asset Investment Corp -4.51% -1.78% -0.17%

Institutional and Insider Ownership

76.8% of Safeguard Scientifics shares are owned by institutional investors. Comparatively, 42.7% of Arlington Asset Investment Corp shares are owned by institutional investors. 2.7% of Safeguard Scientifics shares are owned by company insiders. Comparatively, 2.7% of Arlington Asset Investment Corp shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Safeguard Scientifics and Arlington Asset Investment Corp, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Safeguard Scientifics 0 0 0 0 N/A
Arlington Asset Investment Corp 0 2 1 0 2.33

Arlington Asset Investment Corp has a consensus target price of $16.00, suggesting a potential upside of 16.11%. Given Arlington Asset Investment Corp’s higher possible upside, analysts plainly believe Arlington Asset Investment Corp is more favorable than Safeguard Scientifics.

Summary

Arlington Asset Investment Corp beats Safeguard Scientifics on 10 of the 13 factors compared between the two stocks.

Safeguard Scientifics Company Profile

Safeguard Scientifics, Inc. is engaged in providing capital to technology companies within the fields of healthcare, financial services and digital media. The Company holds interest in companies, which it refers to as partner companies. As of December 31, 2016, the Company held interests in 29 non-consolidated partner companies. The Company offers operational and management support to each of its partner companies. In addition to management and operational support, the Company offers ongoing planning and development assessment. It provides mentoring, advice and guidance to develop partner company management. The Company serves on the boards of directors of its partner companies, working with them to develop and implement strategic and operating plans. It measures and monitors achievement of these plans through regular review of operational and financial performance measurements.

Arlington Asset Investment Corp Company Profile

Arlington Asset Investment Corp. is an investment company. The Company focuses on acquiring and holding a levered portfolio of residential mortgage-backed securities (MBS), consisting of agency MBS and private-label MBS. Agency MBS include residential mortgage pass-through certificates for which the principal and interest payments are guaranteed by a United States Government agency or government-sponsored enterprise (GSE), such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). Private-label MBS, or non-agency MBS, include residential MBS that are not guaranteed by a GSE or the United States Government. The Company funds its investments primarily through short-term financing arrangements. The Company purchases agency MBS either in initial offerings or in the secondary market through broker-dealers or similar entities. It may invest in agency MBS collateralized by adjustable-rate mortgage loans (ARMs) or hybrid ARMs.

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