Burford Capital (NYSE:BUR) versus Federal Agricultural Mortgage (NYSE:AGM) Critical Review

Federal Agricultural Mortgage (NYSE:AGM) and Burford Capital (NYSE:BUR) are both finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their risk, earnings, analyst recommendations, dividends, valuation, institutional ownership and profitability.

Volatility & Risk

Federal Agricultural Mortgage has a beta of 0.97, indicating that its stock price is 3% less volatile than the S&P 500. Comparatively, Burford Capital has a beta of 1.25, indicating that its stock price is 25% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Federal Agricultural Mortgage and Burford Capital, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Federal Agricultural Mortgage	0	1	1	1	3.00
Burford Capital	2	2	2	0	2.00

Federal Agricultural Mortgage presently has a consensus price target of $255.00, suggesting a potential upside of 13.50%. Burford Capital has a consensus price target of $9.33, suggesting a potential upside of 112.85%. Given Burford Capital’s higher probable upside, analysts clearly believe Burford Capital is more favorable than Federal Agricultural Mortgage.

Insider and Institutional Ownership

68.0% of Federal Agricultural Mortgage shares are owned by institutional investors. 1.9% of Federal Agricultural Mortgage shares are owned by company insiders. Comparatively, 8.9% of Burford Capital shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Profitability

This table compares Federal Agricultural Mortgage and Burford Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Federal Agricultural Mortgage	29.98%	18.90%	0.63%
Burford Capital	15.14%	10.24%	4.35%

Dividends

Federal Agricultural Mortgage pays an annual dividend of $6.40 per share and has a dividend yield of 2.8%. Burford Capital pays an annual dividend of $0.12 per share and has a dividend yield of 2.7%. Federal Agricultural Mortgage pays out 35.0% of its earnings in the form of a dividend. Burford Capital pays out -1.6% 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. Federal Agricultural Mortgage has raised its dividend for 14 consecutive years. Federal Agricultural Mortgage is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Earnings and Valuation

This table compares Federal Agricultural Mortgage and Burford Capital”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Federal Agricultural Mortgage	$410.30 million	5.94	$207.41 million	$18.31	12.27
Burford Capital	$413.36 million	2.33	$62.57 million	($7.71)	-0.57

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

Summary

Federal Agricultural Mortgage beats Burford Capital on 11 of the 18 factors compared between the two stocks.

About Federal Agricultural Mortgage

Federal Agricultural Mortgage Corporation provides a secondary market for various loans made to borrowers in the United States. It operates through four segments: Corporate AgFinance, Farm & Ranch, Rural Utilities, and Renewable Energy. The company’s Agricultural Finance line of business engages in purchasing and retaining eligible loans and securities; guaranteeing the payment of principal and interest on securities that represent interests in or obligations secured by pools of eligible loans; servicing eligible loans; and issuing LTSPCs for eligible loans. Its Rural Infrastructure Finance line of business is involved in the purchase of rural utilities loans and renewable energy loans and guarantees of securities backed by loans, as well as LTSPCs for pools of eligible rural utilities loans; by loans for electric or telecommunications facilities by lenders organized as cooperatives to borrowers; and other financial institutions that are secured by pools of eligible loans. Federal Agricultural Mortgage Corporation was incorporated in 1987 and is headquartered in Washington, the District of Columbia.

About Burford Capital

Burford Capital Limited provides legal finance products and services worldwide. The company operates through two segments, Capital Provision, and Asset Management and Other Provision. The Capital Provision segment provides capital to the legal industry or in connection with legal matters directly and through investment in private funds; legal risk management services; lower risk legal finance business focusing on pre-settlement litigation matters with lower risk and lower expected returns; post-settlement finance; and complex strategies in which it acts as a principal and acquires assets that are mispriced. The Asset Management and Other Services segment provides services to the legal industry, including litigation insurance. Burford Capital Limited was incorporated in 2009 and is based in Saint Peter Port, Guernsey.