American Capital Mortgage Investment Corp. (NASDAQ: MTGE) and Invesco Mortgage Capital (NYSE:IVR) are both small-cap finance companies, but which is the better business? We will compare the two companies based on the strength of their analyst recommendations, risk, institutional ownership, valuation, dividends, earnings and profitability.

Valuation & Earnings

This table compares American Capital Mortgage Investment Corp. and Invesco Mortgage Capital’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
American Capital Mortgage Investment Corp. $158.84 million 5.61 $101.67 million $2.22 8.76
Invesco Mortgage Capital $609.31 million 3.20 $484.38 million $4.34 4.03

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

Profitability

This table compares American Capital Mortgage Investment Corp. and Invesco Mortgage Capital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
American Capital Mortgage Investment Corp. 104.38% 10.40% 1.77%
Invesco Mortgage Capital 71.92% 8.97% 1.11%

Risk & Volatility

American Capital Mortgage Investment Corp. has a beta of 0.47, indicating that its stock price is 53% less volatile than the S&P 500. Comparatively, Invesco Mortgage Capital has a beta of 0.81, indicating that its stock price is 19% less volatile than the S&P 500.

Dividends

American Capital Mortgage Investment Corp. pays an annual dividend of $1.80 per share and has a dividend yield of 9.3%. Invesco Mortgage Capital pays an annual dividend of $1.64 per share and has a dividend yield of 9.4%. American Capital Mortgage Investment Corp. pays out 81.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Invesco Mortgage Capital pays out 37.8% of its earnings in the form of a dividend. Invesco Mortgage Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a summary of recent ratings and target prices for American Capital Mortgage Investment Corp. and Invesco Mortgage Capital, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
American Capital Mortgage Investment Corp. 0 1 3 0 2.75
Invesco Mortgage Capital 0 2 2 0 2.50

American Capital Mortgage Investment Corp. presently has a consensus target price of $20.00, suggesting a potential upside of 2.83%. Invesco Mortgage Capital has a consensus target price of $17.75, suggesting a potential upside of 1.54%. Given American Capital Mortgage Investment Corp.’s stronger consensus rating and higher possible upside, equities analysts clearly believe American Capital Mortgage Investment Corp. is more favorable than Invesco Mortgage Capital.

Institutional and Insider Ownership

73.9% of American Capital Mortgage Investment Corp. shares are held by institutional investors. Comparatively, 63.4% of Invesco Mortgage Capital shares are held by institutional investors. 1.1% of American Capital Mortgage Investment Corp. shares are held by company insiders. Comparatively, 0.3% of Invesco Mortgage Capital shares are held 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.

Summary

American Capital Mortgage Investment Corp. beats Invesco Mortgage Capital on 10 of the 16 factors compared between the two stocks.

American Capital Mortgage Investment Corp. Company Profile

MTGE Investment Corp., formerly American Capital Mortgage Investment Corp., is a real estate investment trust. The Company invests in, finances and manages a leveraged portfolio of real estate-related investments, which include agency residential mortgage-backed securities (RMBS), non-agency securities, other mortgage-related investments and other real estate investments. Agency RMBS includes residential mortgage pass-through certificates and collateralized mortgage obligations (CMOs) structured from residential mortgage pass-through certificates for which the principal and interest payments are guaranteed by a government-sponsored enterprise (GSE), or by a United States Government agency, such as Government National Mortgage Association (Ginnie Mae). Non-agency securities include securities backed by residential mortgages that are not guaranteed by a GSE or the United States Government agency, and credit risk transfer securities (CRT). The Company’s manager is MTGE Management, LLC.

Invesco Mortgage Capital Company Profile

Invesco Mortgage Capital Inc. is a holding company, which conducts its businesses through IAS Operating Partnership LP (the Operating Partnership) and subsidiaries. The Company’s objective is to provide risk-adjusted returns to its investors through dividends and through capital appreciation. It invests in residential mortgage-backed securities that are guaranteed by the United States Government agency, such as the Government National Mortgage Association or a federally chartered corporation, such as the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation (collectively Agency RMBS); RMBS that are not guaranteed by the United States Government agency; Credit risk transfer securities that are unsecured obligations issued by government-sponsored enterprises; commercial mortgage-backed securities; residential and commercial mortgage loans, and other real estate-related financing arrangements. It is externally managed and advised by Invesco Advisers, Inc.

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