Financial Review: Cherry Hill Mortgage Investment (NYSE:CHMI) versus Ready Capital (NYSE:RC)

Ready Capital (NYSE:RC) and Cherry Hill Mortgage Investment (NYSE:CHMI) 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, analyst recommendations, earnings, dividends and profitability.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Ready Capital and Cherry Hill Mortgage Investment, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ready Capital	1	3	2	0	2.17
Cherry Hill Mortgage Investment	0	0	2	0	3.00

Ready Capital presently has a consensus target price of $10.93, indicating a potential upside of 25.91%. Cherry Hill Mortgage Investment has a consensus target price of $5.00, indicating a potential upside of 44.09%. Given Cherry Hill Mortgage Investment’s stronger consensus rating and higher possible upside, analysts plainly believe Cherry Hill Mortgage Investment is more favorable than Ready Capital.

Dividends

Ready Capital pays an annual dividend of $1.20 per share and has a dividend yield of 13.8%. Cherry Hill Mortgage Investment pays an annual dividend of $0.60 per share and has a dividend yield of 17.3%. Ready Capital pays out 51.3% of its earnings in the form of a dividend. Cherry Hill Mortgage Investment pays out -35.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Cherry Hill Mortgage Investment is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional and Insider Ownership

55.9% of Ready Capital shares are owned by institutional investors. Comparatively, 18.5% of Cherry Hill Mortgage Investment shares are owned by institutional investors. 1.0% of Ready Capital shares are owned by company insiders. Comparatively, 1.1% of Cherry Hill Mortgage Investment shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

This table compares Ready Capital and Cherry Hill Mortgage Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ready Capital	35.69%	7.99%	1.54%
Cherry Hill Mortgage Investment	-69.00%	19.65%	1.99%

Valuation and Earnings

This table compares Ready Capital and Cherry Hill Mortgage Investment’s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ready Capital	$945.81 million	1.55	$339.45 million	$2.34	3.71
Cherry Hill Mortgage Investment	$49.99 million	2.08	-$34.79 million	($1.70)	-2.04

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

Risk & Volatility

Ready Capital has a beta of 1.41, suggesting that its share price is 41% more volatile than the S&P 500. Comparatively, Cherry Hill Mortgage Investment has a beta of 1.45, suggesting that its share price is 45% more volatile than the S&P 500.

Summary

Cherry Hill Mortgage Investment beats Ready Capital on 9 of the 15 factors compared between the two stocks.

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.

About Cherry Hill Mortgage Investment

Cherry Hill Mortgage Investment Corporation, a residential real estate finance company, acquires, invests in, and manages residential mortgage assets in the United States. It operates through Investments in RMBS (residential mortgage-backed securities) and Investments in Servicing Related Assets segments. Cherry Hill Mortgage Investment Corporation qualifies as a real estate investment trust for federal income tax purposes. The company generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. Cherry Hill Mortgage Investment Corporation was incorporated in 2012 and is based in Farmingdale, New Jersey.