Western Asset Mortgage Capital Corporation (NYSE: WMC) and Hilltop Holdings (NYSE:HTH) are both finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their earnings, valuation, risk, institutional ownership, profitabiliy, analyst recommendations and dividends.

Valuation & Earnings

This table compares Western Asset Mortgage Capital Corporation and Hilltop Holdings’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Western Asset Mortgage Capital Corporation $54.94 million 8.06 $31.02 million $0.74 14.28
Hilltop Holdings $1.64 billion 1.60 $145.82 million $1.48 18.03

Hilltop Holdings has higher revenue and earnings than Western Asset Mortgage Capital Corporation. Western Asset Mortgage Capital Corporation is trading at a lower price-to-earnings ratio than Hilltop Holdings, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

37.2% of Western Asset Mortgage Capital Corporation shares are owned by institutional investors. Comparatively, 55.8% of Hilltop Holdings shares are owned by institutional investors. 0.4% of Western Asset Mortgage Capital Corporation shares are owned by insiders. Comparatively, 22.5% of Hilltop Holdings shares are owned by 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.

Profitability

This table compares Western Asset Mortgage Capital Corporation and Hilltop Holdings’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Western Asset Mortgage Capital Corporation 30.09% 6.96% 0.98%
Hilltop Holdings 8.33% 7.81% 1.14%

Analyst Ratings

This is a summary of current ratings for Western Asset Mortgage Capital Corporation and Hilltop Holdings, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Western Asset Mortgage Capital Corporation 0 4 0 0 2.00
Hilltop Holdings 0 3 0 0 2.00

Western Asset Mortgage Capital Corporation presently has a consensus target price of $10.25, indicating a potential downside of 3.03%. Hilltop Holdings has a consensus target price of $28.63, indicating a potential upside of 7.25%. Given Hilltop Holdings’ higher possible upside, analysts clearly believe Hilltop Holdings is more favorable than Western Asset Mortgage Capital Corporation.

Dividends

Western Asset Mortgage Capital Corporation pays an annual dividend of $1.24 per share and has a dividend yield of 11.7%. Hilltop Holdings pays an annual dividend of $0.24 per share and has a dividend yield of 0.9%. Western Asset Mortgage Capital Corporation pays out 167.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Hilltop Holdings pays out 16.2% of its earnings in the form of a dividend.

Risk and Volatility

Western Asset Mortgage Capital Corporation has a beta of 0.74, suggesting that its stock price is 26% less volatile than the S&P 500. Comparatively, Hilltop Holdings has a beta of 1, suggesting that its stock price has a similar volatility profile to the S&P 500.

Summary

Hilltop Holdings beats Western Asset Mortgage Capital Corporation on 11 of the 14 factors compared between the two stocks.

Western Asset Mortgage Capital Corporation Company Profile

Western Asset Mortgage Capital Corporation is a real estate investment trust. The Company is focused on investing in, financing and managing a diversified portfolio of real estate-related securities, whole-loans and other financial assets. The Company’s portfolio includes Agency residential mortgage-backed securities (RMBS), including Mortgage pass-through certificates, Agency derivatives, Agency Interest-Only Strips and Agency collateralized mortgage obligations (CMOs); Non-Agency RMBS, and Agency commercial mortgage-backed securities (CMBS), Non-Agency CMBS, Non United States CMBS and asset-backed securities (ABS), as well as Residential and Commercial Whole-Loans. The Company may utilize to-be-announced forward contracts (TBAs), in order to invest in Agency RMBS. The Company’s manager is Western Asset Management Company.

Hilltop Holdings Company Profile

Hilltop Holdings Inc. is a financial holding Company. The Company provides business and consumer banking services from offices located throughout Texas through PlainsCapital Bank (the Bank). It has three operating business units, which include PlainsCapital Corporation (PCC) (banking and mortgage origination), Hilltop Securities Holdings LLC (Securities Holdings) (broker-dealer) and PlainsCapital Company (NLC) (insurance). The PCC unit includes the Bank, and its subsidiary, PrimeLending (collectively referred to herein as PlainsCapital), while the Securities Holdings unit includes its broker-dealer operations transferred from the PCC unit, and two entities acquired in the SWS Group, Inc. (SWS) Merger, Hilltop Securities Inc. (Hilltop Securities) and Hilltop Securities Independent Network Inc. (HTS Independent Network). Its segments include Banking, Broker-Dealer, mortgage origination, insurance and Corporate.

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