INVESCO MORTGAGE CAPITAL INC (NYSE: IVR) and iStar Financial (NYSE:STAR) are both small-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their valuation, profitability, earnings, risk, analyst recommendations, institutional ownership and dividends.

Institutional and Insider Ownership

64.9% of INVESCO MORTGAGE CAPITAL INC shares are held by institutional investors. Comparatively, 82.1% of iStar Financial shares are held by institutional investors. 0.3% of INVESCO MORTGAGE CAPITAL INC shares are held by insiders. Comparatively, 4.8% of iStar Financial shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Dividends

INVESCO MORTGAGE CAPITAL INC pays an annual dividend of $1.60 per share and has a dividend yield of 9.5%. iStar Financial does not pay a dividend. INVESCO MORTGAGE CAPITAL INC pays out 36.9% of its earnings in the form of a dividend.

Profitability

This table compares INVESCO MORTGAGE CAPITAL INC and iStar Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
INVESCO MORTGAGE CAPITAL INC 71.92% 8.97% 1.11%
iStar Financial 32.82% 22.21% 4.79%

Earnings and Valuation

This table compares INVESCO MORTGAGE CAPITAL INC and iStar Financial’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
INVESCO MORTGAGE CAPITAL INC $609.31 million 3.08 $484.39 million $4.34 3.88
iStar Financial $584.90 million 1.46 $202.13 million $1.83 6.48

INVESCO MORTGAGE CAPITAL INC has higher revenue and earnings than iStar Financial. INVESCO MORTGAGE CAPITAL INC is trading at a lower price-to-earnings ratio than iStar Financial, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of current ratings and price targets for INVESCO MORTGAGE CAPITAL INC and iStar Financial, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
INVESCO MORTGAGE CAPITAL INC 0 2 3 0 2.60
iStar Financial 0 2 0 0 2.00

INVESCO MORTGAGE CAPITAL INC currently has a consensus price target of $17.44, indicating a potential upside of 3.61%. Given INVESCO MORTGAGE CAPITAL INC’s stronger consensus rating and higher possible upside, equities research analysts plainly believe INVESCO MORTGAGE CAPITAL INC is more favorable than iStar Financial.

Volatility and Risk

INVESCO MORTGAGE CAPITAL INC has a beta of 0.81, meaning that its stock price is 19% less volatile than the S&P 500. Comparatively, iStar Financial has a beta of 1.29, meaning that its stock price is 29% more volatile than the S&P 500.

Summary

INVESCO MORTGAGE CAPITAL INC beats iStar Financial on 10 of the 16 factors compared between the two stocks.

About INVESCO MORTGAGE CAPITAL INC

Invesco Mortgage Capital Inc. is a holding company, which conducts its businesses through IAS Operating Partnership LP (the Operating Partnership) and subsidiaries. The Company’s objective is to provide risk-adjusted returns to its investors through dividends and through capital appreciation. It invests in residential mortgage-backed securities that are guaranteed by the United States Government agency, such as the Government National Mortgage Association or a federally chartered corporation, such as the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation (collectively Agency RMBS); RMBS that are not guaranteed by the United States Government agency; Credit risk transfer securities that are unsecured obligations issued by government-sponsored enterprises; commercial mortgage-backed securities; residential and commercial mortgage loans, and other real estate-related financing arrangements. It is externally managed and advised by Invesco Advisers, Inc.

About iStar Financial

iStar Inc. finances, invests in and develops real estate and real estate related projects as part of its integrated investment platform. The Company’s four business segments are Real Estate Finance, Net Lease, Operating Properties, and Land and Development. The Real Estate Finance portfolio consists of senior and mezzanine real estate loans that may be either fixed-rate or variable-rate. The Net Lease portfolio consists of properties owned by the Company and leased to single tenants, where the properties are subject to long-term leases. The Operating Properties portfolio consists of commercial and residential properties, which represent a pool of assets across a range of geographies and property types. The Land and Development portfolio consists of land entitled for master planned communities, as well as waterfront and urban infill land parcels located throughout the United States. Its Land and Development projects include Great Oaks, Sage Scottsdale, Naples Reserve and Coney Island.

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