Contrasting PennyMac Mortgage Investment Trust (NYSE:PMT) & Ellington Financial (NYSE:EFC)

Ellington Financial (NYSE:EFC) and PennyMac Mortgage Investment Trust (NYSE:PMT) are both small-cap finance companies, but which is the better business? We will compare the two businesses based on the strength of their valuation, risk, analyst recommendations, earnings, dividends, institutional ownership and profitability.

Earnings and Valuation

This table compares Ellington Financial and PennyMac Mortgage Investment Trust”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ellington Financial	$136.41 million	10.53	$145.86 million	$1.34	9.25
PennyMac Mortgage Investment Trust	$307.46 million	3.48	$127.87 million	$0.98	12.56

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

Analyst Ratings

This is a summary of recent ratings for Ellington Financial and PennyMac Mortgage Investment Trust, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ellington Financial	0	3	4	0	2.57
PennyMac Mortgage Investment Trust	0	5	3	0	2.38

Ellington Financial presently has a consensus target price of $14.55, indicating a potential upside of 17.42%. PennyMac Mortgage Investment Trust has a consensus target price of $13.75, indicating a potential upside of 11.74%. Given Ellington Financial’s stronger consensus rating and higher probable upside, analysts clearly believe Ellington Financial is more favorable than PennyMac Mortgage Investment Trust.

Profitability

This table compares Ellington Financial and PennyMac Mortgage Investment Trust’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%
PennyMac Mortgage Investment Trust	41.59%	9.53%	0.71%

Risk and Volatility

Ellington Financial has a beta of 0.95, suggesting that its stock price is 5% less volatile than the S&P 500. Comparatively, PennyMac Mortgage Investment Trust has a beta of 1.27, suggesting that its stock price is 27% more volatile than the S&P 500.

Institutional & Insider Ownership

55.6% of Ellington Financial shares are held by institutional investors. Comparatively, 67.4% of PennyMac Mortgage Investment Trust shares are held by institutional investors. 4.1% of Ellington Financial shares are held by company insiders. Comparatively, 0.9% of PennyMac Mortgage Investment Trust shares are held by company 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

Ellington Financial pays an annual dividend of $1.56 per share and has a dividend yield of 12.6%. PennyMac Mortgage Investment Trust pays an annual dividend of $1.60 per share and has a dividend yield of 13.0%. 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. PennyMac Mortgage Investment Trust pays out 163.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Summary

Ellington Financial beats PennyMac Mortgage Investment Trust on 11 of the 16 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 PennyMac Mortgage Investment Trust

PennyMac Mortgage Investment Trust, through its subsidiary, primarily invests in mortgage-related assets in the United States. The company operates through: Credit Sensitive Strategies, Interest Rate Sensitive Strategies, Correspondent Production segments. Its Credit Sensitive Strategies segment invests in credit risk transfer (CRT) agreements, CRT securities, subordinate mortgage-backed securities (MBS), distressed loans, and real estate. The company's Interest Rate Sensitive Strategies segment engages in investing in mortgage servicing rights, excess servicing spreads, and agency and senior non-agency MBS, as well as related interest rate hedging activities. Its Correspondent Production segment is involved in purchasing, pooling, and reselling newly originated prime credit residential loans directly or in the form of MBS. The company primarily sells its loans to government-sponsored entities or PennyMac Loan Services, LLC. The company qualifies as a real estate investment trust for federal income tax purposes. It generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its shareholders. The company was incorporated in 2009 and is headquartered in Westlake Village, California.