Great Ajax Corp. (NYSE: AJX) and Ellington Residential Mortgage REIT (NYSE:EARN) are both small-cap finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their institutional ownership, profitability, analyst recommendations, risk, dividends, earnings and valuation.

Dividends

Great Ajax Corp. pays an annual dividend of $1.12 per share and has a dividend yield of 7.8%. Ellington Residential Mortgage REIT pays an annual dividend of $1.60 per share and has a dividend yield of 11.2%. Great Ajax Corp. pays out 71.3% of its earnings in the form of a dividend. Ellington Residential Mortgage REIT pays out 121.2% 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 Ratings

This is a summary of current ratings and target prices for Great Ajax Corp. and Ellington Residential Mortgage REIT, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Great Ajax Corp. 0 2 2 0 2.50
Ellington Residential Mortgage REIT 0 3 0 0 2.00

Great Ajax Corp. currently has a consensus price target of $15.13, indicating a potential upside of 5.92%. Ellington Residential Mortgage REIT has a consensus price target of $13.67, indicating a potential downside of 3.96%. Given Great Ajax Corp.’s stronger consensus rating and higher probable upside, equities research analysts clearly believe Great Ajax Corp. is more favorable than Ellington Residential Mortgage REIT.

Profitability

This table compares Great Ajax Corp. and Ellington Residential Mortgage REIT’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Great Ajax Corp. 58.46% 10.22% 3.02%
Ellington Residential Mortgage REIT 44.93% 12.25% 1.18%

Risk and Volatility

Great Ajax Corp. has a beta of 0.88, suggesting that its stock price is 12% less volatile than the S&P 500. Comparatively, Ellington Residential Mortgage REIT has a beta of 0.63, suggesting that its stock price is 37% less volatile than the S&P 500.

Earnings & Valuation

This table compares Great Ajax Corp. and Ellington Residential Mortgage REIT’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Great Ajax Corp. $50.65 million 5.12 $28.53 million $1.57 9.10
Ellington Residential Mortgage REIT $35.93 million 4.90 $16.32 million $1.32 10.78

Great Ajax Corp. has higher revenue and earnings than Ellington Residential Mortgage REIT. Great Ajax Corp. is trading at a lower price-to-earnings ratio than Ellington Residential Mortgage REIT, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

71.9% of Great Ajax Corp. shares are held by institutional investors. Comparatively, 50.2% of Ellington Residential Mortgage REIT shares are held by institutional investors. 3.8% of Great Ajax Corp. shares are held by insiders. Comparatively, 2.7% of Ellington Residential Mortgage REIT shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Summary

Great Ajax Corp. beats Ellington Residential Mortgage REIT on 14 of the 16 factors compared between the two stocks.

About Great Ajax Corp.

Great Ajax Corp. is an externally managed real estate company. The Company is focused on acquiring, investing in and managing a portfolio of re-performing and non-performing mortgage loans secured by single-family residences and single-family properties. Its segment is focused on non-performing mortgages and re-performing mortgages. It also invests in loans secured by multi-family residential and commercial mixed use retail/residential properties, as well as in the properties directly. It also holds real estate-owned properties (REO) acquired upon the foreclosure or other settlement of its owned non-performing loans, as well as through outright purchases. It is managed by Thetis Asset Management LLC, an affiliated entity. Its mortgage loans and other real estate assets are serviced by Gregory Funding LLC, an affiliated entity. The Company conducts its business through its operating partnership, Great Ajax Operating Partnership L.P.

About Ellington Residential Mortgage REIT

Ellington Residential Mortgage REIT is a real estate investment trust. The Company conducts its business through its subsidiaries, EARN OP GP LLC and Ellington Residential Mortgage LP (the Operating Partnership). It specializes in acquiring, investing in and managing residential mortgage- and real estate-related assets. It constructs and managing a portfolio consisting of residential mortgage-backed securities (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) and, to a lesser extent, RMBS backed by prime jumbo, Alternative A-paper manufactured housing, and subprime residential mortgage loans (non-Agency RMBS). Its Agency RMBS include residential mortgage pass-through certificates, collateralized mortgage obligations (CMOs) and to-be-announced mortgage pass-through certificates (TBAs). Its non-agency RMBS include investment grade and non-investment grade classes.

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