Cherry Hill Mortgage Investment (NYSE:CHMI – Get Free Report) and Prospect Capital (NASDAQ:PSEC – Get Free Report) are both small-cap finance companies, but which is the superior business? We will compare the two companies based on the strength of their earnings, valuation, dividends, profitability, institutional ownership, risk and analyst recommendations.
Dividends
Cherry Hill Mortgage Investment pays an annual dividend of $0.40 per share and has a dividend yield of 15.4%. Prospect Capital pays an annual dividend of $0.42 per share and has a dividend yield of 21.6%. Cherry Hill Mortgage Investment pays out 222.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Prospect Capital pays out 840.0% 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.
Risk & Volatility
Cherry Hill Mortgage Investment has a beta of 1.01, indicating that its stock price is 1% more volatile than the S&P 500. Comparatively, Prospect Capital has a beta of 0.82, indicating that its stock price is 18% less volatile than the S&P 500.
Analyst Recommendations
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Cherry Hill Mortgage Investment | 0 | 4 | 1 | 0 | 2.20 |
| Prospect Capital | 2 | 0 | 0 | 0 | 1.00 |
Cherry Hill Mortgage Investment currently has a consensus price target of $3.00, indicating a potential upside of 15.16%. Prospect Capital has a consensus price target of $2.00, indicating a potential upside of 2.83%. Given Cherry Hill Mortgage Investment’s stronger consensus rating and higher probable upside, analysts clearly believe Cherry Hill Mortgage Investment is more favorable than Prospect Capital.
Earnings and Valuation
This table compares Cherry Hill Mortgage Investment and Prospect Capital”s revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Cherry Hill Mortgage Investment | $61.10 million | 1.58 | $6.83 million | $0.18 | 14.47 |
| Prospect Capital | $639.45 million | 1.62 | $153.66 million | $0.05 | 38.90 |
Prospect Capital has higher revenue and earnings than Cherry Hill Mortgage Investment. Cherry Hill Mortgage Investment is trading at a lower price-to-earnings ratio than Prospect Capital, indicating that it is currently the more affordable of the two stocks.
Insider & Institutional Ownership
18.5% of Cherry Hill Mortgage Investment shares are owned by institutional investors. Comparatively, 9.1% of Prospect Capital shares are owned by institutional investors. 1.6% of Cherry Hill Mortgage Investment shares are owned by company insiders. Comparatively, 25.9% of Prospect Capital shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.
Profitability
This table compares Cherry Hill Mortgage Investment and Prospect Capital’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Cherry Hill Mortgage Investment | 26.43% | 21.74% | 1.85% |
| Prospect Capital | 19.33% | 12.15% | 5.54% |
Summary
Cherry Hill Mortgage Investment beats Prospect Capital on 10 of the 17 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 Prospect Capital
Prospect Capital Corporation is a business development company. It specializes in middle market, mature, mezzanine finance, later stage, emerging growth, leveraged buyouts, refinancing, acquisitions, recapitalizations, turnaround, growth capital, development, capital expenditures and subordinated debt tranches of collateralized loan obligations, cash flow term loans, market place lending and bridge transactions. It also makes real estate investments particularly in multi-family residential real estate asset class. The fund makes secured debt, senior debt, senior and secured term loans, unitranche debt, first-lien and second lien, private debt, private equity, mezzanine debt, and equity investments in private and microcap public businesses. It focuses on both primary origination and secondary loans/portfolios and invests in situations like debt financings for private equity sponsors, acquisitions, dividend recapitalizations, growth financings, bridge loans, cash flow term loans, real estate financings/investments. It also focuses on investing in small-sized and medium-sized private companies rather than large public companies. The fund typically invests across all industry sectors, with a particular expertise in the energy and industrial sectors. It invests in aerospace and defense, chemicals, conglomerate services, consumer services, ecological, electronics, financial services, machinery, manufacturing, media, pharmaceuticals, retail, software, specialty minerals, textiles and leather, transportation, oil and gas production, coal production, materials, industrials, consumer discretionary, information technology, utilities, pipeline, storage, power generation and distribution, renewable and clean energy, oilfield services, healthcare, food and beverage, education, business services, and other select sectors. It prefers to invest in the United States and Canada. The fund seeks to invest between $10 million to $500 million per transaction in companies with EBITDA between $5 million and $150 million, sales value between $25 million and $500 million, and enterprise value between $5 million and $1000 million. It fund also co-invests for larger deals. The fund seeks control acquisitions by providing multiple levels of the capital structure. The fund focuses on sole, agented, club, or syndicated deals.
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