Contrasting Cathay General Bancorp (CATY) & Ellington Financial (EFC)

Cathay General Bancorp (NASDAQ: CATY) and Ellington Financial (NYSE:EFC) are both finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their risk, earnings, dividends, analyst recommendations, institutional ownership, valuation and profitability.

Profitability

This table compares Cathay General Bancorp and Ellington Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Cathay General Bancorp 33.87% 10.60% 1.36%
Ellington Financial 31.55% 5.79% 1.37%

Dividends

Cathay General Bancorp pays an annual dividend of $0.96 per share and has a dividend yield of 2.2%. Ellington Financial pays an annual dividend of $1.64 per share and has a dividend yield of 11.2%. Cathay General Bancorp pays out 39.0% of its earnings in the form of a dividend. Ellington Financial pays out 188.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Risk and Volatility

Cathay General Bancorp has a beta of 1.34, indicating that its share price is 34% more volatile than the S&P 500. Comparatively, Ellington Financial has a beta of 0.41, indicating that its share price is 59% less volatile than the S&P 500.

Institutional and Insider Ownership

67.5% of Cathay General Bancorp shares are owned by institutional investors. Comparatively, 45.7% of Ellington Financial shares are owned by institutional investors. 5.8% of Cathay General Bancorp shares are owned by company insiders. Comparatively, 10.6% of Ellington Financial shares are owned by company 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.

Analyst Ratings

This is a breakdown of current ratings and price targets for Cathay General Bancorp and Ellington Financial, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Cathay General Bancorp 0 4 2 0 2.33
Ellington Financial 0 1 5 0 2.83

Cathay General Bancorp currently has a consensus target price of $41.50, indicating a potential downside of 3.62%. Ellington Financial has a consensus target price of $17.42, indicating a potential upside of 18.72%. Given Ellington Financial’s stronger consensus rating and higher possible upside, analysts clearly believe Ellington Financial is more favorable than Cathay General Bancorp.

Valuation & Earnings

This table compares Cathay General Bancorp and Ellington Financial’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Cathay General Bancorp $532.44 million 6.54 $175.09 million $2.46 17.50
Ellington Financial $80.18 million 5.84 -$16.00 million $0.87 16.86

Cathay General Bancorp has higher revenue and earnings than Ellington Financial. Ellington Financial is trading at a lower price-to-earnings ratio than Cathay General Bancorp, indicating that it is currently the more affordable of the two stocks.

Summary

Cathay General Bancorp beats Ellington Financial on 10 of the 16 factors compared between the two stocks.

Cathay General Bancorp Company Profile

Cathay General Bancorp is a bank holding company. The Company holds Cathay Bank, a California state-chartered commercial bank (the Bank); seven limited partnerships investing in affordable housing investments; GBC Venture Capital, Inc., and Asia Realty Corp. The Company also owns the common stock of five statutory business trusts created for issuing capital securities. The Bank primarily services individuals, professionals and small to medium-sized businesses in the local markets and provides commercial mortgage loans, commercial loans, small business administration (SBA) loans, residential mortgage loans, real estate construction loans, home equity lines of credit and installment loans to individuals for automobile, household and other consumer expenditures. The Bank offers passbook accounts, checking accounts, money market deposit accounts, certificates of deposit, individual retirement accounts, college certificates of deposit and public funds deposits.

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.

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