Chicago Atlantic Real Estate Finance (NASDAQ:REFI) and Ellington Financial (NYSE:EFC) Critical Review

Ellington Financial (NYSE:EFC) and Chicago Atlantic Real Estate Finance (NASDAQ:REFI) 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, institutional ownership, earnings, risk, profitability, valuation and dividends.

Profitability

This table compares Ellington Financial and Chicago Atlantic Real Estate Finance’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%
Chicago Atlantic Real Estate Finance	54.57%	11.53%	8.06%

Earnings & Valuation

This table compares Ellington Financial and Chicago Atlantic Real Estate Finance”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ellington Financial	$390.76 million	4.45	$146.87 million	$1.64	8.23
Chicago Atlantic Real Estate Finance	$53.45 million	5.25	$36.01 million	$1.37	7.99

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

Dividends

Ellington Financial pays an annual dividend of $1.56 per share and has a dividend yield of 11.6%. Chicago Atlantic Real Estate Finance pays an annual dividend of $1.88 per share and has a dividend yield of 17.2%. 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. Chicago Atlantic Real Estate Finance pays out 137.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Chicago Atlantic Real Estate Finance has increased its dividend for 1 consecutive years. Chicago Atlantic Real Estate Finance is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of recent recommendations and price targets for Ellington Financial and Chicago Atlantic Real Estate Finance, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ellington Financial	0	4	0	0	2.00
Chicago Atlantic Real Estate Finance	0	3	2	0	2.40

Ellington Financial presently has a consensus target price of $14.50, suggesting a potential upside of 7.41%. Chicago Atlantic Real Estate Finance has a consensus target price of $15.33, suggesting a potential upside of 40.03%. Given Chicago Atlantic Real Estate Finance’s stronger consensus rating and higher possible upside, analysts plainly believe Chicago Atlantic Real Estate Finance is more favorable than Ellington Financial.

Volatility & Risk

Ellington Financial has a beta of 0.94, indicating that its stock price is 6% less volatile than the S&P 500. Comparatively, Chicago Atlantic Real Estate Finance has a beta of 0.26, indicating that its stock price is 74% less volatile than the S&P 500.

Insider & Institutional Ownership

55.6% of Ellington Financial shares are owned by institutional investors. Comparatively, 25.5% of Chicago Atlantic Real Estate Finance shares are owned by institutional investors. 3.2% of Ellington Financial shares are owned by company insiders. Comparatively, 6.5% of Chicago Atlantic Real Estate Finance shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Summary

Chicago Atlantic Real Estate Finance beats Ellington Financial on 9 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 Chicago Atlantic Real Estate Finance

Chicago Atlantic Real Estate Finance, Inc. operates as a commercial real estate finance company in the United States. The company engages in originating, structuring, and investing in first mortgage loans and alternative structured financings secured by commercial real estate properties. Its portfolio primarily includes offers senior loans to state-licensed operators in the cannabis industry. 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. Chicago Atlantic Real Estate Finance, Inc. was incorporated in 2021 and is headquartered in Chicago, Illinois.