Ellington Financial (NYSE: EFC) and Walker & Dunlop (NYSE:WD) are both small-cap finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, analyst recommendations, institutional ownership, earnings, risk, dividends and valuation.

Profitability

This table compares Ellington Financial and Walker & Dunlop’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ellington Financial 26.67% 5.48% 1.32%
Walker & Dunlop 21.91% 22.86% 5.38%

Volatility & Risk

Ellington Financial has a beta of 0.44, suggesting that its share price is 56% less volatile than the S&P 500. Comparatively, Walker & Dunlop has a beta of 1.39, suggesting that its share price is 39% more volatile than the S&P 500.

Valuation and Earnings

This table compares Ellington Financial and Walker & Dunlop’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Ellington Financial $71.00 million 7.33 $22.48 million $0.70 23.14
Walker & Dunlop $649.05 million 2.28 $142.17 million $4.55 10.40

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

Insider and Institutional Ownership

51.0% of Ellington Financial shares are owned by institutional investors. Comparatively, 78.7% of Walker & Dunlop shares are owned by institutional investors. 10.6% of Ellington Financial shares are owned by company insiders. Comparatively, 11.7% of Walker & Dunlop shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Dividends

Ellington Financial pays an annual dividend of $1.80 per share and has a dividend yield of 11.1%. Walker & Dunlop 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 breakdown of recent ratings and target prices for Ellington Financial and Walker & Dunlop, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ellington Financial 0 0 3 0 3.00
Walker & Dunlop 0 2 1 0 2.33

Ellington Financial currently has a consensus target price of $19.17, indicating a potential upside of 18.31%. Walker & Dunlop has a consensus target price of $44.00, indicating a potential downside of 7.06%. Given Ellington Financial’s stronger consensus rating and higher probable upside, analysts clearly believe Ellington Financial is more favorable than Walker & Dunlop.

Summary

Walker & Dunlop beats Ellington Financial on 9 of the 16 factors compared between the two stocks.

Ellington Financial Company Profile

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.

Walker & Dunlop Company Profile

Walker & Dunlop, Inc. is a holding company, which conducts its operations through Walker & Dunlop, LLC. The Company provides commercial real estate financial products and services primarily to developers and owners of multifamily properties. The Company originates, sells and services a range of multifamily and other commercial real estate financing products, including Multifamily Finance, Federal Housing Administration (FHA) Finance, Capital Markets, and Proprietary Capital. It originates and sells loans through the programs of the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac, and together with Fannie Mae, the government-sponsored enterprises (GSEs)), the Government National Mortgage Association (Ginnie Mae) and the Federal Housing Administration, a division of the United States Department of Housing and Urban Development (together with Ginnie Mae, HUD).

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