Ellington Financial (NYSE: EFC) and Porter Bancorp (NASDAQ:PBIB) are both small-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their profitabiliy, dividends, institutional ownership, earnings, risk, analyst recommendations and valuation.

Institutional and Insider Ownership

51.1% of Ellington Financial shares are held by institutional investors. Comparatively, 18.4% of Porter Bancorp shares are held by institutional investors. 10.6% of Ellington Financial shares are held by company insiders. Comparatively, 28.7% of Porter Bancorp shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Earnings & Valuation

This table compares Ellington Financial and Porter Bancorp’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Ellington Financial $71.00 million 7.35 $22.48 million $0.70 23.21
Porter Bancorp $35.80 million 1.84 -$2.01 million ($0.33) -32.82

Ellington Financial has higher revenue and earnings than Porter Bancorp. Porter Bancorp is trading at a lower price-to-earnings ratio than Ellington Financial, indicating that it is currently the more affordable of the two stocks.

Dividends

Ellington Financial pays an annual dividend of $1.80 per share and has a dividend yield of 11.1%. Porter Bancorp does not pay a dividend. Ellington Financial pays out 257.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Analyst Recommendations

This is a summary of current ratings and target prices for Ellington Financial and Porter Bancorp, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ellington Financial 0 0 3 0 3.00
Porter Bancorp 0 0 0 0 N/A

Ellington Financial currently has a consensus target price of $19.17, suggesting a potential upside of 17.95%. Given Ellington Financial’s higher probable upside, equities analysts clearly believe Ellington Financial is more favorable than Porter Bancorp.

Profitability

This table compares Ellington Financial and Porter Bancorp’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ellington Financial 26.67% 5.44% 1.34%
Porter Bancorp -4.59% -5.33% -0.20%

Volatility and Risk

Ellington Financial has a beta of 0.44, meaning that its stock price is 56% less volatile than the S&P 500. Comparatively, Porter Bancorp has a beta of 1.72, meaning that its stock price is 72% more volatile than the S&P 500.

Summary

Ellington Financial beats Porter Bancorp on 11 of the 14 factors compared between the two stocks.

About Ellington Financial

Ellington Financial LLC is a specialty finance company that acquires and manages mortgage-related and other financial assets. The Company’s targeted assets include residential mortgage-backed securities (RMBS), backed by loans for which the principal and interest payments are not guaranteed by a United States Government agency or a United States Government-sponsored entity, collectively referred to as non-Agency RMBS; RMBS for which the principal and interest payments are guaranteed by the United States government agency or the United States government-sponsored entity (Agency RMBS); consumer loans and asset-backed securities (ABS) backed by consumer loans; commercial mortgage-backed securities (CMBS) commercial mortgage loans and other commercial real estate debt; residential mortgage loans; collateralized loan obligations (CLOs); corporate debt and equity, including distressed debt and equity, and mortgage-related derivatives.

About Porter Bancorp

Porter Bancorp, Inc. is a bank holding company. The Company operates through its subsidiary, PBI Bank (the Bank). The Bank is a community bank with a range of commercial and personal banking products. It offers retail and commercial deposit products. It offers drive-in banking facilities, automatic teller machines, night depository, personalized checks, credit cards, debit cards, Internet banking, mobile banking, treasury management services, remote deposit services, electronic funds transfers through automated clearing house services, domestic and foreign wire transfers, cash management, vault services, and loan and deposit sweep accounts. It operates banking offices in approximately 12 counties in Kentucky. Its markets include metropolitan Louisville in Jefferson County and the surrounding counties of Henry and Bullitt. It serves south central Kentucky and southern Kentucky from banking offices in Butler, Green, Hart, Edmonson, Barren, Warren, Ohio and Daviess Counties.

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