Financial Analysis: Cherry Hill Mortgage Investment (NYSE:CHMI) versus Ellington Financial (NYSE:EFC)

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

Risk and Volatility

Cherry Hill Mortgage Investment has a beta of 0.98, meaning that its stock price is 2% less volatile than the S&P 500. Comparatively, Ellington Financial has a beta of 1, meaning that its stock price has a similar volatility profile to the S&P 500.

Institutional & Insider Ownership

18.5% of Cherry Hill Mortgage Investment shares are owned by institutional investors. Comparatively, 55.6% of Ellington Financial shares are owned by institutional investors. 1.5% of Cherry Hill Mortgage Investment shares are owned by insiders. Comparatively, 4.1% of Ellington Financial shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Dividends

Cherry Hill Mortgage Investment pays an annual dividend of $0.40 per share and has a dividend yield of 16.9%. Ellington Financial pays an annual dividend of $1.56 per share and has a dividend yield of 11.7%. Cherry Hill Mortgage Investment pays out -76.9% of its earnings in the form of a dividend. Ellington Financial pays out 125.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Cherry Hill Mortgage Investment has raised its dividend for 1 consecutive years. Cherry Hill Mortgage Investment is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

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

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Cherry Hill Mortgage Investment	1	2	0	1	2.25
Ellington Financial	0	3	5	0	2.63

Cherry Hill Mortgage Investment currently has a consensus price target of $4.00, suggesting a potential upside of 69.13%. Ellington Financial has a consensus price target of $14.46, suggesting a potential upside of 8.59%. Given Cherry Hill Mortgage Investment’s higher probable upside, analysts clearly believe Cherry Hill Mortgage Investment is more favorable than Ellington Financial.

Profitability

This table compares Cherry Hill Mortgage Investment and Ellington Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Cherry Hill Mortgage Investment	-14.28%	15.55%	1.33%
Ellington Financial	89.52%	13.56%	1.07%

Earnings & Valuation

This table compares Cherry Hill Mortgage Investment and Ellington Financial”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Cherry Hill Mortgage Investment	$55.80 million	1.53	$11.97 million	($0.52)	-4.55
Ellington Financial	$285.59 million	4.66	$145.86 million	$1.24	10.74

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

Summary

Ellington Financial beats Cherry Hill Mortgage Investment on 11 of the 18 factors compared between the two stocks.

About Cherry Hill Mortgage Investment

Cherry Hill Mortgage Investment Corporation, a residential real estate finance company, acquires, invests in, and manages residential mortgage assets in the United States. It operates through Investments in RMBS (residential mortgage-backed securities) and Investments in Servicing Related Assets segments. Cherry Hill Mortgage Investment Corporation qualifies as a real estate investment trust for federal income tax purposes. The company generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. Cherry Hill Mortgage Investment Corporation was incorporated in 2012 and is based in Farmingdale, New Jersey.

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.