Financial Analysis: Chimera Investment (NYSE:CIM) vs. AFC Gamma (NASDAQ:AFCG)

Chimera Investment (NYSE:CIM) and AFC Gamma (NASDAQ:AFCG) are both small-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their analyst recommendations, risk, institutional ownership, dividends, profitability, earnings and valuation.

Institutional and Insider Ownership

48.4% of Chimera Investment shares are owned by institutional investors. Comparatively, 26.5% of AFC Gamma shares are owned by institutional investors. 1.5% of Chimera Investment shares are owned by insiders. Comparatively, 30.7% of AFC Gamma shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares Chimera Investment and AFC Gamma’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Chimera Investment	2.27%	9.36%	1.55%
AFC Gamma	-43.21%	1.48%	0.85%

Earnings and Valuation

This table compares Chimera Investment and AFC Gamma”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Chimera Investment	$821.34 million	1.38	$230.50 million	($0.80)	-16.97
AFC Gamma	$31.32 million	2.82	-$20.67 million	($0.64)	-5.86

Chimera Investment has higher revenue and earnings than AFC Gamma. Chimera Investment is trading at a lower price-to-earnings ratio than AFC Gamma, indicating that it is currently the more affordable of the two stocks.

Dividends

Chimera Investment pays an annual dividend of $1.80 per share and has a dividend yield of 13.3%. AFC Gamma pays an annual dividend of $0.20 per share and has a dividend yield of 5.3%. Chimera Investment pays out -225.0% of its earnings in the form of a dividend. AFC Gamma pays out -31.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Chimera Investment has raised its dividend for 1 consecutive years. Chimera Investment is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

Chimera Investment has a beta of 1.71, meaning that its stock price is 71% more volatile than the S&P 500. Comparatively, AFC Gamma has a beta of 0.77, meaning that its stock price is 23% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings and target prices for Chimera Investment and AFC Gamma, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Chimera Investment	1	2	1	0	2.00
AFC Gamma	1	2	0	0	1.67

Chimera Investment presently has a consensus price target of $14.50, indicating a potential upside of 6.80%. AFC Gamma has a consensus price target of $4.50, indicating a potential upside of 20.00%. Given AFC Gamma’s higher probable upside, analysts clearly believe AFC Gamma is more favorable than Chimera Investment.

Summary

Chimera Investment beats AFC Gamma on 12 of the 17 factors compared between the two stocks.

About Chimera Investment

Chimera Investment Corporation operates as a real estate investment trust (REIT) in the United States. The company, through its subsidiaries, invests in a portfolio of mortgage assets, including residential mortgage loans, agency residential mortgage-backed securities, non-agency residential mortgage-backed securities, agency mortgage-backed securities secured by pools of commercial mortgage loans, business purpose and investor loans, and other real estate related securities. It invests in investment grade, non-investment grade, and non-rated classes. 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. Chimera Investment Corporation was incorporated in 2007 and is headquartered in New York, New York.

About AFC Gamma

AFC Gamma, Inc. originates, structures, underwrites, and invests in senior secured loans, and other various commercial real estate loans and debt securities for established companies operating in the cannabis industry. It primarily originates loans structured as senior loans secured by real estate, equipment, and licenses and/or other assets of the loan parties to the extent permitted by applicable laws and the regulations governing such loan parties. The company has elected and qualified to be taxed as a real estate investment trust for the United States federal income tax purposes under the Internal Revenue Code of 1986. AFC Gamma, Inc. was incorporated in 2020 and is based in West Palm Beach, Florida.