Contrasting 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 business? We will contrast the two companies based on the strength of their institutional ownership, analyst recommendations, profitability, valuation, earnings, risk and dividends.

Analyst Ratings

This is a summary of current ratings and recommmendations for Capstead Mortgage and PennyMac Mortgage Investment Trust, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Capstead Mortgage 0 2 0 0 2.00
PennyMac Mortgage Investment Trust 0 2 1 0 2.33

Capstead Mortgage currently has a consensus price target of $11.00, indicating a potential upside of 20.88%. PennyMac Mortgage Investment Trust has a consensus price target of $18.50, indicating a potential upside of 15.91%. Given Capstead Mortgage’s higher probable upside, equities analysts clearly believe Capstead Mortgage is more favorable than PennyMac Mortgage Investment Trust.

Volatility & Risk

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

Valuation and Earnings

This table compares Capstead Mortgage and PennyMac Mortgage Investment Trust’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Capstead Mortgage $213.33 million 4.10 $82.87 million $0.61 14.92
PennyMac Mortgage Investment Trust $272.09 million 3.85 $75.81 million $1.42 11.24

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.

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%

Dividends

Capstead Mortgage pays an annual dividend of $0.76 per share and has a dividend yield of 8.4%. PennyMac Mortgage Investment Trust pays an annual dividend of $1.88 per share and has a dividend yield of 11.8%. 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. Capstead Mortgage has raised its dividend for 3 consecutive years.

Insider & Institutional Ownership

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

Summary

PennyMac Mortgage Investment Trust beats Capstead Mortgage on 10 of the 17 factors compared between the two stocks.

Capstead Mortgage Company Profile

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.

PennyMac Mortgage Investment Trust Company Profile

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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