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

Volatility and Risk

American Capital Mortgage Investment Corp. has a beta of 0.47, meaning that its share price is 53% less volatile than the S&P 500. Comparatively, Ellington Residential Mortgage REIT has a beta of 0.64, meaning that its share price is 36% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and target prices for American Capital Mortgage Investment Corp. and Ellington Residential Mortgage REIT, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Capital Mortgage Investment Corp. 0 1 3 0 2.75
Ellington Residential Mortgage REIT 0 2 0 0 2.00

American Capital Mortgage Investment Corp. presently has a consensus price target of $20.00, indicating a potential upside of 1.27%. Ellington Residential Mortgage REIT has a consensus price target of $14.00, indicating a potential downside of 2.78%. Given American Capital Mortgage Investment Corp.’s stronger consensus rating and higher probable upside, equities analysts plainly believe American Capital Mortgage Investment Corp. is more favorable than Ellington Residential Mortgage REIT.

Valuation and Earnings

This table compares American Capital Mortgage Investment Corp. and Ellington Residential Mortgage REIT’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
American Capital Mortgage Investment Corp. $158.84 million 5.69 $101.67 million $2.22 8.90
Ellington Residential Mortgage REIT $35.93 million 5.29 $17.43 million $1.32 10.91

American Capital Mortgage Investment Corp. has higher revenue and earnings than Ellington Residential Mortgage REIT. American Capital Mortgage Investment 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.

Profitability

This table compares American Capital Mortgage Investment Corp. and Ellington Residential Mortgage REIT’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
American Capital Mortgage Investment Corp. 104.38% 10.40% 1.77%
Ellington Residential Mortgage REIT 44.93% 12.25% 1.18%

Dividends

American Capital Mortgage Investment Corp. pays an annual dividend of $1.80 per share and has a dividend yield of 9.1%. Ellington Residential Mortgage REIT pays an annual dividend of $1.60 per share and has a dividend yield of 11.1%. American Capital Mortgage Investment Corp. pays out 81.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. 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.

Insider and Institutional Ownership

73.9% of American Capital Mortgage Investment Corp. shares are held by institutional investors. Comparatively, 62.1% of Ellington Residential Mortgage REIT shares are held by institutional investors. 1.1% of American Capital Mortgage Investment Corp. shares are held by company insiders. Comparatively, 2.7% of Ellington Residential Mortgage REIT shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Summary

American Capital Mortgage Investment Corp. beats Ellington Residential Mortgage REIT on 12 of the 16 factors compared between the two stocks.

American Capital Mortgage Investment Corp. Company Profile

MTGE Investment Corp., formerly American Capital Mortgage Investment Corp., is a real estate investment trust. The Company invests in, finances and manages a leveraged portfolio of real estate-related investments, which include agency residential mortgage-backed securities (RMBS), non-agency securities, other mortgage-related investments and other real estate investments. Agency RMBS includes residential mortgage pass-through certificates and collateralized mortgage obligations (CMOs) structured from residential mortgage pass-through certificates for which the principal and interest payments are guaranteed by a government-sponsored enterprise (GSE), or by a United States Government agency, such as Government National Mortgage Association (Ginnie Mae). Non-agency securities include securities backed by residential mortgages that are not guaranteed by a GSE or the United States Government agency, and credit risk transfer securities (CRT). The Company’s manager is MTGE Management, LLC.

Ellington Residential Mortgage REIT Company Profile

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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