Comparing Ready Capital (NYSE:RC) & ARMOUR Residential REIT (NYSE:ARR)

ARMOUR Residential REIT (NYSE:ARR) and Ready Capital (NYSE:RC) are both small-cap finance companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, institutional ownership, risk, analyst recommendations, valuation, dividends and profitability.

Profitability

This table compares ARMOUR Residential REIT and Ready Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
ARMOUR Residential REIT	40.31%	15.30%	1.65%
Ready Capital	-39.55%	-10.29%	-2.05%

Volatility & Risk

ARMOUR Residential REIT has a beta of 1.44, meaning that its stock price is 44% more volatile than the S&P 500. Comparatively, Ready Capital has a beta of 1.45, meaning that its stock price is 45% more volatile than the S&P 500.

Dividends

ARMOUR Residential REIT pays an annual dividend of $2.88 per share and has a dividend yield of 18.6%. Ready Capital pays an annual dividend of $0.04 per share and has a dividend yield of 2.6%. ARMOUR Residential REIT pays out 105.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ready Capital pays out -2.7% of its earnings in the form of a dividend.

Valuation and Earnings

This table compares ARMOUR Residential REIT and Ready Capital”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
ARMOUR Residential REIT	$800.42 million	2.31	$322.69 million	$2.73	5.67
Ready Capital	$569.17 million	0.43	-$228.91 million	($1.47)	-1.03

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

Insider and Institutional Ownership

54.2% of ARMOUR Residential REIT shares are owned by institutional investors. Comparatively, 55.9% of Ready Capital shares are owned by institutional investors. 0.4% of ARMOUR Residential REIT shares are owned by company insiders. Comparatively, 1.1% of Ready Capital shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Analyst Ratings

This is a summary of current ratings and price targets for ARMOUR Residential REIT and Ready Capital, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ARMOUR Residential REIT	1	2	3	0	2.33
Ready Capital	2	4	0	0	1.67

ARMOUR Residential REIT presently has a consensus target price of $18.17, suggesting a potential upside of 17.41%. Ready Capital has a consensus target price of $2.81, suggesting a potential upside of 85.15%. Given Ready Capital’s higher possible upside, analysts clearly believe Ready Capital is more favorable than ARMOUR Residential REIT.

Summary

ARMOUR Residential REIT beats Ready Capital on 11 of the 16 factors compared between the two stocks.

About ARMOUR Residential REIT

ARMOUR Residential REIT, Inc. invests in residential mortgage-backed securities (MBS) in the United States. Its securities portfolio primarily consists of the United States Government-sponsored entity's (GSE) and the Government National Mortgage Administration's issued or guaranteed securities backed by fixed rate, hybrid adjustable rate, and adjustable-rate home loans; and unsecured notes and bonds issued by the GSE and the United States treasuries, as well as money market instruments. The company has elected to be taxed as a real estate investment trust. As a result, it would not be subject to corporate income tax on that portion of its net income that is distributed to shareholders. ARMOUR Residential REIT, Inc. was incorporated in 2008 and is based in Vero Beach, Florida.

About Ready Capital

Ready Capital Corporation operates as a real estate finance company in the United States. It operates through two segments: LMM Commercial Real Estate and Small Business Lending. The company originates, acquires, finances, and services lower-to-middle-market (LLM) commercial real estate loans, small business administration (SBA) loans, residential mortgage loans, construction loans, and mortgage-backed securities collateralized primarily by LLM loans, or other real estate-related investments. The LMM Commercial Real Estate segment originates LLM loans across the full life-cycle of an LLM property, including construction, bridge, stabilized, and agency loan origination channels. The Small Business Lending segment acquires, originates, and services owner-occupied loans guaranteed by the SBA under its SBA Section 7(a) Program; and acquires purchased future receivables. The company has elected to be taxed as a real estate investment trust (REIT) and would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. The company was formerly known as Sutherland Asset Management Corporation and changed its name to Ready Capital Corporation in September 2018. Ready Capital Corporation was founded in 2007 and is headquartered in New York, New York.