Contrasting Invesco Mortgage Capital (NYSE:IVR) & Ellington Financial (NYSE:EFC)

Ellington Financial (NYSE:EFC) and Invesco Mortgage Capital (NYSE:IVR) are both small-cap finance companies, but which is the superior stock? We will compare the two companies based on the strength of their analyst recommendations, valuation, dividends, institutional ownership, profitability, earnings and risk.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Ellington Financial and Invesco Mortgage Capital, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ellington Financial	0	3	5	0	2.63
Invesco Mortgage Capital	1	2	1	1	2.40

Ellington Financial presently has a consensus price target of $14.46, suggesting a potential upside of 5.65%. Invesco Mortgage Capital has a consensus price target of $8.25, suggesting a potential downside of 2.72%. Given Ellington Financial’s stronger consensus rating and higher probable upside, equities research analysts plainly believe Ellington Financial is more favorable than Invesco Mortgage Capital.

Volatility & Risk

Ellington Financial has a beta of 0.95, suggesting that its share price is 5% less volatile than the S&P 500. Comparatively, Invesco Mortgage Capital has a beta of 1.71, suggesting that its share price is 71% more volatile than the S&P 500.

Profitability

This table compares Ellington Financial and Invesco Mortgage Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ellington Financial	89.04%	14.55%	1.15%
Invesco Mortgage Capital	18.16%	29.47%	2.90%

Dividends

Ellington Financial pays an annual dividend of $1.56 per share and has a dividend yield of 11.4%. Invesco Mortgage Capital pays an annual dividend of $1.44 per share and has a dividend yield of 17.0%. Ellington Financial pays out 116.4% 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 282.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Earnings and Valuation

This table compares Ellington Financial and Invesco Mortgage Capital”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ellington Financial	$136.41 million	11.16	$145.86 million	$1.34	10.21
Invesco Mortgage Capital	$286.55 million	2.10	$59.88 million	$0.51	16.63

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

Institutional & Insider Ownership

55.6% of Ellington Financial shares are owned by institutional investors. Comparatively, 40.5% of Invesco Mortgage Capital shares are owned by institutional investors. 4.1% of Ellington Financial shares are owned by company insiders. Comparatively, 0.2% of Invesco Mortgage Capital shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Summary

Ellington Financial beats Invesco Mortgage Capital on 10 of the 17 factors compared between the two stocks.

About Ellington Financial

Ellington Financial Inc., through its subsidiary, Ellington Financial Operating Partnership LLC, acquires and manages mortgage-related, consumer-related, corporate-related, and other financial assets in the United States. The company acquires and manages residential mortgage-backed securities (RMBS) backed by prime jumbo, Alt-A, manufactured housing, and subprime mortgage; RMBS for which the principal and interest payments are guaranteed by the U.S. government agency or the U.S. government-sponsored entity; residential mortgage loans; commercial mortgage-backed securities; and commercial mortgage loans and other commercial real estate debt. It also provides collateralized loan obligations; mortgage-related and non-mortgage-related derivatives; corporate debt and equity securities; corporate loans; and other strategic investments; and consumer loans and asset-backed securities backed by consumer and commercial assets. The company qualifies as a real estate investment trust (REIT) for federal income tax purposes. As a REIT, it intends to distribute at least 90% of its taxable income as dividends to shareholders. Ellington Financial LLC was incorporated in 2007 and is headquartered in Old Greenwich, Connecticut.

About Invesco Mortgage Capital

Invesco Mortgage Capital Inc. operates as a real estate investment trust (REIT) that invests, finances, and manages mortgage-backed securities and other mortgage-related assets in the United States. It invests in residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS) that are guaranteed by a U.S. government agency or federally chartered corporation; RMBS and CMBS that are not issued or guaranteed by the United States government agency or federally chartered corporation; the United States treasury securities; real estate-related financing arrangements; to-be-announced securities forward contracts to purchase RMBS; and commercial mortgage loans. It has elected to be taxed as a REIT and would be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. The company was incorporated in 2008 and is headquartered in Atlanta, Georgia.