Ellington Financial (NYSE: EFC) and Walter Investment Management Corp. (NYSE:WAC) are both small-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their risk, dividends, profitability, valuation, institutional ownership, earnings and analyst recommendations.
Valuation & Earnings
This table compares Ellington Financial and Walter Investment Management Corp.’s top-line revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Ellington Financial||$69.62 million||7.40||$22.48 million||$0.70||22.91|
|Walter Investment Management Corp.||$947.12 million||0.01||-$217.78 million||($5.96)||-0.05|
Ellington Financial has higher revenue, but lower earnings than Walter Investment Management Corp.. Walter Investment Management Corp. is trading at a lower price-to-earnings ratio than Ellington Financial, indicating that it is currently the more affordable of the two stocks.
Institutional and Insider Ownership
51.0% of Ellington Financial shares are held by institutional investors. Comparatively, 62.2% of Walter Investment Management Corp. shares are held by institutional investors. 10.6% of Ellington Financial shares are held by company insiders. Comparatively, 50.1% of Walter Investment Management Corp. shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.
This table compares Ellington Financial and Walter Investment Management Corp.’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Walter Investment Management Corp.||-18.10%||-75.98%||-0.52%|
This is a summary of recent ratings and recommmendations for Ellington Financial and Walter Investment Management Corp., as provided by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Walter Investment Management Corp.||1||1||0||0||1.50|
Ellington Financial presently has a consensus price target of $19.17, indicating a potential upside of 19.49%. Walter Investment Management Corp. has a consensus price target of $1.13, indicating a potential upside of 261.62%. Given Walter Investment Management Corp.’s higher probable upside, analysts plainly believe Walter Investment Management Corp. is more favorable than Ellington Financial.
Ellington Financial pays an annual dividend of $1.80 per share and has a dividend yield of 11.2%. Walter Investment Management Corp. does not pay a dividend. Ellington Financial pays out 257.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.
Volatility & Risk
Ellington Financial has a beta of 0.44, suggesting that its share price is 56% less volatile than the S&P 500. Comparatively, Walter Investment Management Corp. has a beta of 0.6, suggesting that its share price is 40% less volatile than the S&P 500.
Ellington Financial beats Walter Investment Management Corp. on 9 of the 15 factors compared between the two stocks.
Ellington Financial Company Profile
Ellington Financial LLC is a specialty finance company that acquires and manages mortgage-related and other financial assets. The Company’s targeted assets include residential mortgage-backed securities (RMBS), backed by loans for which the principal and interest payments are not guaranteed by a United States Government agency or a United States Government-sponsored entity, collectively referred to as non-Agency RMBS; 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); consumer loans and asset-backed securities (ABS) backed by consumer loans; commercial mortgage-backed securities (CMBS) commercial mortgage loans and other commercial real estate debt; residential mortgage loans; collateralized loan obligations (CLOs); corporate debt and equity, including distressed debt and equity, and mortgage-related derivatives.
Walter Investment Management Corp. Company Profile
Walter Investment Management Corp. is a diversified mortgage banking firm focused primarily on the servicing and origination of residential loans, including reverse loans. The Company operates through three segments: Servicing, Originations and Reverse Mortgage. The Servicing segment consists of operations that perform servicing for third-party credit owners of mortgage loans, as well as its own mortgage loan portfolio. The Servicing segment also includes Insurance, and Loans and Residuals businesses. The Originations segment consists of operations that originate and purchase mortgage loans that are intended for sale to third parties. The Reverse Mortgage segment consists of operations which purchases and originates home equity conversion mortgage that are securitized, but remain on the consolidated balance sheet as collateral for secured borrowings.
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