Head to Head Analysis: Capstead Mortgage (CMO) and PennyMac Mortgage Investment Trust (PMT)

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

Earnings & Valuation

This table compares Capstead Mortgage and PennyMac Mortgage Investment Trust’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Capstead Mortgage $213.33 million 3.90 $82.87 million $0.61 14.18
PennyMac Mortgage Investment Trust $272.09 million 3.87 $75.81 million $1.42 11.32

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

Analyst Recommendations

This is a summary of recent recommendations and price targets for Capstead Mortgage and PennyMac Mortgage Investment Trust, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Capstead Mortgage 0 1 1 0 2.50
PennyMac Mortgage Investment Trust 0 2 1 0 2.33

Capstead Mortgage currently has a consensus target price of $11.00, indicating a potential upside of 27.17%. PennyMac Mortgage Investment Trust has a consensus target price of $18.50, indicating a potential upside of 15.12%. Given Capstead Mortgage’s stronger consensus rating and higher probable upside, equities research analysts clearly believe Capstead Mortgage is more favorable than PennyMac Mortgage Investment Trust.

Dividends

Capstead Mortgage pays an annual dividend of $0.76 per share and has a dividend yield of 8.8%. PennyMac Mortgage Investment Trust pays an annual dividend of $1.88 per share and has a dividend yield of 11.7%. Capstead Mortgage pays out 124.6% 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 132.4% 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 has raised its dividend for 3 consecutive years. PennyMac Mortgage Investment Trust is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Capstead Mortgage and PennyMac Mortgage Investment Trust’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Capstead Mortgage 34.00% 7.16% 0.54%
PennyMac Mortgage Investment Trust 36.07% 7.59% 1.75%

Institutional & Insider Ownership

73.0% of Capstead Mortgage shares are held by institutional investors. Comparatively, 63.0% of PennyMac Mortgage Investment Trust shares are held by institutional investors. 1.7% of Capstead Mortgage shares are held by company insiders. Comparatively, 2.1% of PennyMac Mortgage Investment Trust shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Risk & Volatility

Capstead Mortgage has a beta of 0.3, meaning that its share price is 70% less volatile than the S&P 500. Comparatively, PennyMac Mortgage Investment Trust has a beta of 0.52, meaning that its share price is 48% less volatile than the S&P 500.

Summary

PennyMac Mortgage Investment Trust beats Capstead Mortgage on 9 of the 16 factors compared between the two stocks.

About Capstead Mortgage

Capstead Mortgage Corporation operates as a self-managed real estate investment trust (REIT). The Company manages a leveraged portfolio of residential mortgage pass-through securities consisting of relatively short-duration adjustable-rate mortgage (ARM) securities issued and guaranteed by government-sponsored enterprises, either Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac), or by an agency of the federal government, the Government National Mortgage Association (Ginnie Mae). The Company finances its residential mortgage investments by leveraging its long-term investment capital with secured borrowings consisting primarily of borrowings under repurchase arrangements with commercial banks and other financial institutions. The Company’s portfolio of residential mortgage investments includes residential mortgage investments.

About PennyMac Mortgage Investment Trust

PennyMac Mortgage Investment Trust is a specialty finance company that invests primarily in residential mortgage loans and mortgage-related assets. The Company conducts all of its operations, and makes all of its investments, through PennyMac Operating Partnership, L.P. (its Operating Partnership) and its subsidiaries. It operates through two segments: correspondent production and investment activities. Its investment activities segment represents the Company’s investments in mortgage-related assets. The correspondent production segment represents the Company’s operations aimed at serving as an intermediary between mortgage lenders and the capital markets by purchasing, pooling and reselling newly originated prime credit quality mortgage loans either directly or in the form of MBS, using the services of PNMAC Capital Management (the Manager or PCM) and PennyMac Loan Services, LLC (PLS), both indirect subsidiaries of PennyMac Financial Services, Inc. (PFSI or PennyMac).

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