Head to Head Review: Capstead Mortgage (CMO) & Ladder Capital (LADR)

Capstead Mortgage (NYSE: CMO) and Ladder Capital (NYSE:LADR) are both small-cap financials companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, institutional ownership, risk, dividends, analyst recommendations, earnings and valuation.

Valuation & Earnings

This table compares Capstead Mortgage and Ladder Capital’s top-line 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 3.95 $82.87 million $0.60 14.60
Ladder Capital $399.68 million 4.09 $66.72 million $0.87 16.95

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

Dividends

Capstead Mortgage pays an annual dividend of $0.76 per share and has a dividend yield of 8.7%. Ladder Capital pays an annual dividend of $1.26 per share and has a dividend yield of 8.5%. Capstead Mortgage pays out 126.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ladder Capital pays out 144.8% 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 is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Capstead Mortgage and Ladder Capital, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Capstead Mortgage 0 1 1 0 2.50
Ladder Capital 0 0 5 0 3.00

Capstead Mortgage currently has a consensus target price of $11.00, indicating a potential upside of 25.57%. Ladder Capital has a consensus target price of $16.25, indicating a potential upside of 10.17%. Given Capstead Mortgage’s higher possible upside, equities analysts plainly believe Capstead Mortgage is more favorable than Ladder Capital.

Profitability

This table compares Capstead Mortgage and Ladder Capital’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%
Ladder Capital 27.38% 9.78% 2.40%

Insider & Institutional Ownership

73.0% of Capstead Mortgage shares are owned by institutional investors. Comparatively, 46.2% of Ladder Capital shares are owned by institutional investors. 1.7% of Capstead Mortgage shares are owned by insiders. Comparatively, 12.5% of Ladder Capital shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Volatility and Risk

Capstead Mortgage has a beta of 0.3, indicating that its share price is 70% less volatile than the S&P 500. Comparatively, Ladder Capital has a beta of 1.03, indicating that its share price is 3% more volatile than the S&P 500.

Summary

Ladder Capital beats Capstead Mortgage on 10 of the 16 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.

Ladder Capital Company Profile

Ladder Capital Corp is a commercial real estate finance company. The Company’s segments include loans, securities, real estate and corporate/other. The loans segment includes mortgage loan receivables held for investment (balance sheet loans) and mortgage loan receivables held for sale (conduit loans). The securities segment consists of all of its activities related to commercial real estate securities, which include investments in commercial mortgage-backed securities (CMBS) and United States Agency Securities. The real estate segment includes net leased properties, office buildings, a warehouse and condominium units. The Corporate/other segment includes the Company’s investments in joint ventures, other asset management activities and operating expenses. The Company invests primarily in loans, securities and other interests in the United States commercial real estate, with a focus on senior secured assets.

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