PennyMac Mortgage Investment Trust (NYSE: PMT) and CYS Investments (NYSE:CYS) are both small-cap finance companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, valuation, risk, dividends, analyst recommendations, earnings and profitability.

Analyst Recommendations

This is a breakdown of current ratings and price targets for PennyMac Mortgage Investment Trust and CYS Investments, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
PennyMac Mortgage Investment Trust 0 2 1 0 2.33
CYS Investments 0 3 0 0 2.00

PennyMac Mortgage Investment Trust currently has a consensus price target of $18.50, suggesting a potential upside of 16.21%. CYS Investments has a consensus price target of $8.25, suggesting a potential downside of 0.24%. Given PennyMac Mortgage Investment Trust’s stronger consensus rating and higher possible upside, research analysts plainly believe PennyMac Mortgage Investment Trust is more favorable than CYS Investments.

Profitability

This table compares PennyMac Mortgage Investment Trust and CYS Investments’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
PennyMac Mortgage Investment Trust 36.07% 7.59% 1.75%
CYS Investments -2.59% 13.30% 1.37%

Insider & Institutional Ownership

63.0% of PennyMac Mortgage Investment Trust shares are owned by institutional investors. Comparatively, 62.3% of CYS Investments shares are owned by institutional investors. 2.1% of PennyMac Mortgage Investment Trust shares are owned by insiders. Comparatively, 1.0% of CYS Investments shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Valuation & Earnings

This table compares PennyMac Mortgage Investment Trust and CYS Investments’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
PennyMac Mortgage Investment Trust $272.09 million 3.84 $75.81 million $1.42 11.21
CYS Investments $294.54 million 4.35 $16.39 million ($0.20) -41.35

PennyMac Mortgage Investment Trust has higher earnings, but lower revenue than CYS Investments. CYS Investments is trading at a lower price-to-earnings ratio than PennyMac Mortgage Investment Trust, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

PennyMac Mortgage Investment Trust has a beta of 0.52, suggesting that its stock price is 48% less volatile than the S&P 500. Comparatively, CYS Investments has a beta of 0.62, suggesting that its stock price is 38% less volatile than the S&P 500.

Dividends

PennyMac Mortgage Investment Trust pays an annual dividend of $1.88 per share and has a dividend yield of 11.8%. CYS Investments pays an annual dividend of $1.00 per share and has a dividend yield of 12.1%. PennyMac Mortgage Investment Trust pays out 132.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. CYS Investments pays out -500.0% of its earnings in the form of a dividend. CYS Investments is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

PennyMac Mortgage Investment Trust beats CYS Investments on 10 of the 16 factors compared between the two stocks.

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).

CYS Investments Company Profile

CYS Investments, Inc. is a specialty finance company. The Company’s objective is to provide consistent returns to its investors through a combination of dividends and capital appreciation. It invests in agency residential mortgage-backed security (RMBS) collateralized by fixed rate single-family residential mortgage loans; adjustable-rate mortgages (ARMs), which have coupon rates that reset monthly, or hybrid ARMs, which have a coupon rate that is fixed for an initial period. In addition, it has investments in collateralized mortgage obligations issued by a government agency or government-sponsored entity (GSE) that are collateralized by Agency RMBS. Its investments consist of residential mortgage pass-through securities for which the principal and interest payments are guaranteed by a GSE, such as Federal National Mortgage Association and Federal Home Loan Mortgage Corporation, or by the United States Government agency, such as Government National Mortgage Association.

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