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

Volatility and Risk

First Bank has a beta of 0.57, suggesting that its stock price is 43% less volatile than the S&P 500. Comparatively, Ellington Financial has a beta of 0.44, suggesting that its stock price is 56% less volatile than the S&P 500.

Insider and Institutional Ownership

43.3% of First Bank shares are owned by institutional investors. Comparatively, 50.5% of Ellington Financial shares are owned by institutional investors. 10.6% of Ellington Financial shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Profitability

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

Net Margins Return on Equity Return on Assets
First Bank 17.19% N/A N/A
Ellington Financial 26.67% 5.48% 1.32%

Earnings and Valuation

This table compares First Bank and Ellington Financial’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
First Bank $31.35 million 5.92 $9.61 million $0.64 19.30
Ellington Financial $69.62 million 7.20 $22.48 million $0.70 22.30

Ellington Financial has higher revenue and earnings than First Bank. First Bank 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

First Bank pays an annual dividend of $0.08 per share and has a dividend yield of 0.6%. Ellington Financial pays an annual dividend of $1.80 per share and has a dividend yield of 11.5%. First Bank pays out 12.5% of its earnings in the form of 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 First Bank and Ellington Financial, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
First Bank 0 0 1 0 3.00
Ellington Financial 0 0 2 0 3.00

First Bank presently has a consensus target price of $14.00, suggesting a potential upside of 13.36%. Ellington Financial has a consensus target price of $18.75, suggesting a potential upside of 20.12%. Given Ellington Financial’s higher probable upside, analysts clearly believe Ellington Financial is more favorable than First Bank.

Summary

Ellington Financial beats First Bank on 13 of the 15 factors compared between the two stocks.

About First Bank

First Bank is a commercial bank. The Company provides a range of lending, deposit and other financial products and services. It operates through Community Banking segment, which is engaged in providing a range of commercial and retail and related banking services. It offers a range of lending products to meet the needs of its customers located within its market areas, including commercial and industrial loans, commercial real estate loans (including owner-occupied, investor, construction and development and multi-family loans), residential real estate loans, and consumer and other loans. It offers a range of deposit instruments, including non-interest bearing demand deposits (such as checking accounts), interest bearing demand accounts, money market accounts, savings accounts and certificates of deposit. It operates over 10 branches located in Cranbury, Denville, Ewing, Flemington, Hamilton, Lawrence, Somerset, Randolph and Williamstown, New Jersey, and Trevose, Pennsylvania.

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.

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