Financial Analysis: Ladder Capital (LADR) versus New Residential Investment (NRZ)

Ladder Capital (NYSE: LADR) and New Residential Investment (NYSE:NRZ) are both financials companies, but which is the better business? We will contrast the two businesses based on the strength of their earnings, profitability, risk, valuation, analyst recommendations, institutional ownership and dividends.

Institutional and Insider Ownership

46.2% of Ladder Capital shares are owned by institutional investors. Comparatively, 45.1% of New Residential Investment shares are owned by institutional investors. 12.5% of Ladder Capital shares are owned by insiders. Comparatively, 0.5% of New Residential Investment shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of current recommendations for Ladder Capital and New Residential Investment, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ladder Capital 0 0 5 0 3.00
New Residential Investment 0 0 6 0 3.00

Ladder Capital presently has a consensus price target of $16.25, suggesting a potential upside of 12.77%. New Residential Investment has a consensus price target of $18.92, suggesting a potential upside of 17.06%. Given New Residential Investment’s higher possible upside, analysts clearly believe New Residential Investment is more favorable than Ladder Capital.

Dividends

Ladder Capital pays an annual dividend of $1.26 per share and has a dividend yield of 8.7%. New Residential Investment pays an annual dividend of $2.00 per share and has a dividend yield of 12.4%. Ladder Capital pays out 144.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. New Residential Investment pays out 64.7% of its earnings in the form of a dividend. New Residential Investment has raised its dividend for 4 consecutive years. New Residential Investment is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Ladder Capital and New Residential Investment’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ladder Capital 27.38% 9.78% 2.40%
New Residential Investment 60.06% 19.38% 3.99%

Valuation & Earnings

This table compares Ladder Capital and New Residential Investment’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Ladder Capital $399.68 million 3.99 $66.72 million $0.87 16.56
New Residential Investment $1.08 billion 5.04 $504.45 million $3.09 5.23

New Residential Investment has higher revenue and earnings than Ladder Capital. New Residential Investment is trading at a lower price-to-earnings ratio than Ladder Capital, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Ladder Capital has a beta of 1.04, meaning that its stock price is 4% more volatile than the S&P 500. Comparatively, New Residential Investment has a beta of 0.92, meaning that its stock price is 8% less volatile than the S&P 500.

Summary

New Residential Investment beats Ladder Capital on 12 of the 16 factors compared between the two stocks.

Ladder Capital Company Profile

Ladder Capital Corp is a commercial real estate finance company. The Company’s segments include loans, securities, real estate and corporate/other. The loans segment includes mortgage loan receivables held for investment (balance sheet loans) and mortgage loan receivables held for sale (conduit loans). The securities segment consists of all of its activities related to commercial real estate securities, which include investments in commercial mortgage-backed securities (CMBS) and United States Agency Securities. The real estate segment includes net leased properties, office buildings, a warehouse and condominium units. The Corporate/other segment includes the Company’s investments in joint ventures, other asset management activities and operating expenses. The Company invests primarily in loans, securities and other interests in the United States commercial real estate, with a focus on senior secured assets.

New Residential Investment Company Profile

New Residential Investment Corp. is a real estate investment trust (REIT). The Company focuses on investing in, and managing, investments related to residential real estate. The Company’s segments include investments in excess mortgage servicing rights (Excess MSRs); investments in mortgage servicing rights (MSRs); investments in servicer advances; investments in real estate securities; investments in residential mortgage loans; investments in consumer loans, and corporate. Its portfolio includes mortgage servicing related assets, residential mortgage backed securities (RMBS), residential mortgage loans and other investments. The Company’s servicing related assets include its investments in Excess MSRs, MSRs and servicer advances. The Company invests in agency RMBS and non-agency RMBS. The Company’s other investments consist of consumer loans.

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