Diamond Hill Investment Group (NASDAQ: DHIL) and Arlington Asset Investment (NYSE:AI) are both small-cap finance companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, analyst recommendations, institutional ownership, risk, valuation, profitability and dividends.
Risk and Volatility
Diamond Hill Investment Group has a beta of 0.89, suggesting that its stock price is 11% less volatile than the S&P 500. Comparatively, Arlington Asset Investment has a beta of 0.75, suggesting that its stock price is 25% less volatile than the S&P 500.
60.4% of Diamond Hill Investment Group shares are owned by institutional investors. Comparatively, 41.9% of Arlington Asset Investment shares are owned by institutional investors. 7.3% of Diamond Hill Investment Group shares are owned by insiders. Comparatively, 5.9% of Arlington Asset Investment 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.
Arlington Asset Investment pays an annual dividend of $2.20 per share and has a dividend yield of 18.9%. Diamond Hill Investment Group does not pay a dividend. Arlington Asset Investment pays out 392.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.
This table compares Diamond Hill Investment Group and Arlington Asset Investment’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Diamond Hill Investment Group||34.43%||29.19%||21.13%|
|Arlington Asset Investment||14.42%||4.68%||0.40%|
Earnings & Valuation
This table compares Diamond Hill Investment Group and Arlington Asset Investment’s gross revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Diamond Hill Investment Group||$145.20 million||5.11||$49.98 million||$14.47||14.71|
|Arlington Asset Investment||$121.25 million||2.69||$17.43 million||$0.56||20.73|
Diamond Hill Investment Group has higher revenue and earnings than Arlington Asset Investment. Diamond Hill Investment Group is trading at a lower price-to-earnings ratio than Arlington Asset Investment, indicating that it is currently the more affordable of the two stocks.
This is a summary of recent recommendations and price targets for Diamond Hill Investment Group and Arlington Asset Investment, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Diamond Hill Investment Group||0||0||0||0||N/A|
|Arlington Asset Investment||0||2||2||0||2.50|
Arlington Asset Investment has a consensus target price of $13.31, indicating a potential upside of 14.66%. Given Arlington Asset Investment’s higher possible upside, analysts clearly believe Arlington Asset Investment is more favorable than Diamond Hill Investment Group.
Diamond Hill Investment Group beats Arlington Asset Investment on 11 of the 15 factors compared between the two stocks.
About Diamond Hill Investment Group
Diamond Hill Investment Group, Inc. provides investment advisory and fund administration services. The Company’s subsidiaries include Diamond Hill Capital Management, Inc. (DHCM), Beacon Hill Fund Services, Inc. (BHFS) and BHIL Distributors, Inc. (BHIL). The Company’s primary objective is to fulfill its fiduciary duty to clients. The Company provides investment management and administration services to mutual funds, institutional accounts and private investment funds. DHCM is an investment advisor to the Diamond Hill Funds (the Funds), a series of open-end mutual funds, private investment funds (Private Funds), an exchange traded fund and other institutional accounts. In addition, DHCM is administrator for the Funds. BHFS provides compliance, treasury and other fund administration services to investment advisors and mutual funds. BHIL is a subsidiary of BHFS. BHIL provides underwriting services to mutual funds. BHFS and BHIL collectively operate as Beacon Hill.
About Arlington Asset Investment
Arlington Asset Investment Corp. is an investment company. The Company focuses on acquiring and holding a levered portfolio of residential mortgage-backed securities (MBS), consisting of agency MBS and private-label MBS. Agency MBS include residential mortgage pass-through certificates for which the principal and interest payments are guaranteed by a United States Government agency or government-sponsored enterprise (GSE), such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). Private-label MBS, or non-agency MBS, include residential MBS that are not guaranteed by a GSE or the United States Government. The Company funds its investments primarily through short-term financing arrangements. The Company purchases agency MBS either in initial offerings or in the secondary market through broker-dealers or similar entities. It may invest in agency MBS collateralized by adjustable-rate mortgage loans (ARMs) or hybrid ARMs.
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