Reviewing PennyMac Mortgage Investment Trust (NYSE:PMT) and Ready Capital (NYSE:RC)

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

Volatility and Risk

PennyMac Mortgage Investment Trust has a beta of 1.27, suggesting that its stock price is 27% more volatile than the S&P 500. Comparatively, Ready Capital has a beta of 1.47, suggesting that its stock price is 47% more volatile than the S&P 500.

Institutional and Insider Ownership

67.4% of PennyMac Mortgage Investment Trust shares are owned by institutional investors. Comparatively, 55.9% of Ready Capital shares are owned by institutional investors. 0.9% of PennyMac Mortgage Investment Trust shares are owned by insiders. Comparatively, 1.1% of Ready Capital shares are owned by 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.

Analyst Recommendations

This is a breakdown of current ratings for PennyMac Mortgage Investment Trust and Ready Capital, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
PennyMac Mortgage Investment Trust	0	5	3	0	2.38
Ready Capital	1	6	1	0	2.00

PennyMac Mortgage Investment Trust currently has a consensus target price of $14.50, suggesting a potential upside of 14.62%. Ready Capital has a consensus target price of $6.96, suggesting a potential upside of 55.32%. Given Ready Capital’s higher possible upside, analysts plainly believe Ready Capital is more favorable than PennyMac Mortgage Investment Trust.

Dividends

PennyMac Mortgage Investment Trust pays an annual dividend of $1.60 per share and has a dividend yield of 12.6%. Ready Capital pays an annual dividend of $0.50 per share and has a dividend yield of 11.2%. PennyMac Mortgage Investment Trust pays out 172.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ready Capital pays out -28.7% of its earnings in the form of a dividend.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
PennyMac Mortgage Investment Trust	40.42%	8.87%	0.90%
Ready Capital	-34.40%	5.53%	1.06%

Valuation & Earnings

This table compares PennyMac Mortgage Investment Trust and Ready Capital”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
PennyMac Mortgage Investment Trust	$334.19 million	3.29	$160.98 million	$0.93	13.60
Ready Capital	$896.97 million	0.85	-$435.76 million	($1.74)	-2.57

PennyMac Mortgage Investment Trust has higher earnings, but lower revenue than Ready Capital. Ready Capital 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.

Summary

PennyMac Mortgage Investment Trust beats Ready Capital on 10 of the 16 factors compared between the two stocks.

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.

About Ready Capital

Ready Capital Corporation operates as a real estate finance company in the United States. It operates through two segments: LMM Commercial Real Estate and Small Business Lending. The company originates, acquires, finances, and services lower-to-middle-market (LLM) commercial real estate loans, small business administration (SBA) loans, residential mortgage loans, construction loans, and mortgage-backed securities collateralized primarily by LLM loans, or other real estate-related investments. The LMM Commercial Real Estate segment originates LLM loans across the full life-cycle of an LLM property, including construction, bridge, stabilized, and agency loan origination channels. The Small Business Lending segment acquires, originates, and services owner-occupied loans guaranteed by the SBA under its SBA Section 7(a) Program; and acquires purchased future receivables. The company has elected to be taxed as a real estate investment trust (REIT) and would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. The company was formerly known as Sutherland Asset Management Corporation and changed its name to Ready Capital Corporation in September 2018. Ready Capital Corporation was founded in 2007 and is headquartered in New York, New York.