Analyzing Ellington Financial (NYSE:EFC) & KKR Real Estate Finance Trust (NYSE:KREF)

Ellington Financial (NYSE:EFC) and KKR Real Estate Finance Trust (NYSE:KREF) are both small-cap finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their analyst recommendations, earnings, institutional ownership, risk, valuation, dividends and profitability.

Volatility and Risk

Ellington Financial has a beta of 0.97, indicating that its share price is 3% less volatile than the S&P 500. Comparatively, KKR Real Estate Finance Trust has a beta of 0.88, indicating that its share price is 12% less volatile than the S&P 500.

Earnings & Valuation

This table compares Ellington Financial and KKR Real Estate Finance Trust”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ellington Financial	$390.76 million	3.83	$146.87 million	$1.64	7.08
KKR Real Estate Finance Trust	$435.60 million	0.84	-$47.05 million	($3.28)	-1.90

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

Profitability

This table compares Ellington Financial and KKR Real Estate Finance Trust’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ellington Financial	52.43%	16.61%	1.38%
KKR Real Estate Finance Trust	-47.33%	-1.53%	-0.27%

Insider and Institutional Ownership

55.6% of Ellington Financial shares are owned by institutional investors. Comparatively, 70.2% of KKR Real Estate Finance Trust shares are owned by institutional investors. 3.2% of Ellington Financial shares are owned by company insiders. Comparatively, 2.1% of KKR Real Estate Finance Trust shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers 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 13.4%. KKR Real Estate Finance Trust pays an annual dividend of $0.40 per share and has a dividend yield of 6.4%. Ellington Financial pays out 95.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. KKR Real Estate Finance Trust pays out -12.2% of its earnings in the form of a dividend.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Ellington Financial and KKR Real Estate Finance Trust, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ellington Financial	0	4	0	0	2.00
KKR Real Estate Finance Trust	2	5	1	1	2.11

Ellington Financial presently has a consensus target price of $14.50, suggesting a potential upside of 24.91%. KKR Real Estate Finance Trust has a consensus target price of $8.92, suggesting a potential upside of 42.78%. Given KKR Real Estate Finance Trust’s stronger consensus rating and higher probable upside, analysts plainly believe KKR Real Estate Finance Trust is more favorable than Ellington Financial.

Summary

Ellington Financial beats KKR Real Estate Finance Trust on 10 of the 17 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 KKR Real Estate Finance Trust

KKR Real Estate Finance Trust Inc., a mortgage real estate investment trust, focuses primarily on originating and acquiring transitional senior loans secured by commercial real estate (CRE) assets. It engages in the origination and purchase of credit investments related to CRE, including leveraged and unleveraged commercial real estate loans. The company has elected to be taxed as a real estate investment trust and would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. KKR Real Estate Finance Trust Inc. was incorporated in 2014 and is headquartered in New York, New York.