Western Asset Mortgage Capital Corporation (NYSE: WMC) and PennyMac Mortgage Investment Trust (NYSE:PMT) are both small-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their valuation, analyst recommendations, risk, profitability, earnings, institutional ownership and dividends.

Institutional and Insider Ownership

38.0% of Western Asset Mortgage Capital Corporation shares are held by institutional investors. Comparatively, 64.1% of PennyMac Mortgage Investment Trust shares are held by institutional investors. 0.4% of Western Asset Mortgage Capital Corporation shares are held by company insiders. Comparatively, 1.8% of PennyMac Mortgage Investment Trust shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Profitability

This table compares Western Asset Mortgage Capital Corporation and PennyMac Mortgage Investment Trust’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Western Asset Mortgage Capital Corporation 30.83% 5.97% 0.83%
PennyMac Mortgage Investment Trust 37.97% 8.67% 1.95%

Volatility and Risk

Western Asset Mortgage Capital Corporation has a beta of 0.72, meaning that its share price is 28% less volatile than the S&P 500. Comparatively, PennyMac Mortgage Investment Trust has a beta of 0.52, meaning that its share price is 48% less volatile than the S&P 500.

Dividends

Western Asset Mortgage Capital Corporation pays an annual dividend of $1.24 per share and has a dividend yield of 11.6%. PennyMac Mortgage Investment Trust pays an annual dividend of $1.88 per share and has a dividend yield of 10.8%. Western Asset Mortgage Capital Corporation pays out 151.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. PennyMac Mortgage Investment Trust pays out 109.9% 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 price targets for Western Asset Mortgage Capital Corporation and PennyMac Mortgage Investment Trust, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Western Asset Mortgage Capital Corporation 0 3 0 0 2.00
PennyMac Mortgage Investment Trust 0 4 3 0 2.43

Western Asset Mortgage Capital Corporation currently has a consensus target price of $10.00, suggesting a potential downside of 6.19%. PennyMac Mortgage Investment Trust has a consensus target price of $16.95, suggesting a potential downside of 2.42%. Given PennyMac Mortgage Investment Trust’s stronger consensus rating and higher possible upside, analysts clearly believe PennyMac Mortgage Investment Trust is more favorable than Western Asset Mortgage Capital Corporation.

Valuation and Earnings

This table compares Western Asset Mortgage Capital Corporation and PennyMac Mortgage Investment Trust’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Western Asset Mortgage Capital Corporation $59.85 million 7.47 $34.37 million $0.82 13.00
PennyMac Mortgage Investment Trust $318.72 million 3.64 $114.30 million $1.71 10.16

PennyMac Mortgage Investment Trust has higher revenue and earnings than Western Asset Mortgage Capital Corporation. PennyMac Mortgage Investment Trust is trading at a lower price-to-earnings ratio than Western Asset Mortgage Capital Corporation, indicating that it is currently the more affordable of the two stocks.

Summary

PennyMac Mortgage Investment Trust beats Western Asset Mortgage Capital Corporation on 12 of the 16 factors compared between the two stocks.

Western Asset Mortgage Capital Corporation Company Profile

Western Asset Mortgage Capital Corporation is a real estate investment trust. The Company is focused on investing in, financing and managing a diversified portfolio of real estate-related securities, whole-loans and other financial assets. The Company’s portfolio includes Agency residential mortgage-backed securities (RMBS), including Mortgage pass-through certificates, Agency derivatives, Agency Interest-Only Strips and Agency collateralized mortgage obligations (CMOs); Non-Agency RMBS, and Agency commercial mortgage-backed securities (CMBS), Non-Agency CMBS, Non United States CMBS and asset-backed securities (ABS), as well as Residential and Commercial Whole-Loans. The Company may utilize to-be-announced forward contracts (TBAs), in order to invest in Agency RMBS. The Company’s manager is Western Asset Management Company.

PennyMac Mortgage Investment Trust Company Profile

PennyMac Mortgage Investment Trust is a specialty finance company that invests primarily in residential mortgage loans and mortgage-related assets. The Company conducts all of its operations, and makes all of its investments, through PennyMac Operating Partnership, L.P. (its Operating Partnership) and its subsidiaries. It operates through two segments: correspondent production and investment activities. Its investment activities segment represents the Company’s investments in mortgage-related assets. The correspondent production segment represents the Company’s operations aimed at serving as an intermediary between mortgage lenders and the capital markets by purchasing, pooling and reselling newly originated prime credit quality mortgage loans either directly or in the form of MBS, using the services of PNMAC Capital Management (the Manager or PCM) and PennyMac Loan Services, LLC (PLS), both indirect subsidiaries of PennyMac Financial Services, Inc. (PFSI or PennyMac).

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