Encore Capital Group (NASDAQ: ECPG) and Orchid Island Capital (NYSE:ORC) are both small-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their analyst recommendations, dividends, earnings, profitability, institutional ownership, valuation and risk.
Risk & Volatility
Encore Capital Group has a beta of 1.68, suggesting that its stock price is 68% more volatile than the S&P 500. Comparatively, Orchid Island Capital has a beta of 0.32, suggesting that its stock price is 68% less volatile than the S&P 500.
This is a summary of recent ratings and recommmendations for Encore Capital Group and Orchid Island Capital, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Encore Capital Group||0||2||3||0||2.60|
|Orchid Island Capital||0||0||0||0||N/A|
Encore Capital Group presently has a consensus target price of $51.63, suggesting a potential upside of 16.01%. Given Encore Capital Group’s higher probable upside, equities analysts clearly believe Encore Capital Group is more favorable than Orchid Island Capital.
Insider and Institutional Ownership
28.9% of Orchid Island Capital shares are held by institutional investors. 8.8% of Encore Capital Group shares are held by insiders. Comparatively, 0.9% of Orchid Island Capital shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.
This table compares Encore Capital Group and Orchid Island Capital’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Encore Capital Group||7.01%||18.70%||2.59%|
|Orchid Island Capital||N/A||9.77%||1.02%|
Earnings and Valuation
This table compares Encore Capital Group and Orchid Island Capital’s revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Encore Capital Group||$1.19 billion||0.97||$83.22 million||$3.15||14.13|
|Orchid Island Capital||$145.96 million||2.65||$2.00 million||$0.02||365.00|
Encore Capital Group has higher revenue and earnings than Orchid Island Capital. Encore Capital Group is trading at a lower price-to-earnings ratio than Orchid Island Capital, indicating that it is currently the more affordable of the two stocks.
Orchid Island Capital pays an annual dividend of $1.32 per share and has a dividend yield of 18.1%. Encore Capital Group does not pay a dividend. Orchid Island Capital pays out 6,600.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.
Encore Capital Group beats Orchid Island Capital on 12 of the 15 factors compared between the two stocks.
About Encore Capital Group
Encore Capital Group, Inc., through its subsidiaries, is a specialty finance company providing debt recovery solutions for consumers and property owners across a range of financial assets. The Company operates through Portfolio Purchasing and Recovery segment. The Company’s geographical segments include the United States, Europe and other. The Company’s portfolios of defaulted consumer receivables at discounts and manages them by partnering with individuals as they repay their obligations and work toward financial recovery. Defaulted receivables are consumers’ unpaid financial commitments to credit originators, including banks, credit unions, consumer finance companies, commercial retailers, and telecommunication companies. Defaulted receivables also include receivables subject to bankruptcy proceedings. The Company through certain subsidiaries, is engaged in portfolio purchasing and recovery in the United States, including Puerto Rico.
About Orchid Island Capital
Orchid Island Capital, Inc. is a specialty finance company that invests in residential mortgage-backed securities (RMBS). The Company’s business objective is to provide attractive risk-adjusted total returns to its investors over the long term through a combination of capital appreciation and the payment of regular monthly distributions. Its portfolio consists of two categories of Agency RMBS: pass-through Agency RMBS and structured Agency RMBS. It invests in pass-through securities, which are securities secured by residential real property in which payments of both interest and principal on the securities are generally made monthly. The mortgage loans underlying pass-through certificates are classified into three categories, including fixed-rate mortgages, adjustable-rate mortgages (ARMs) and Hybrid ARMs. It invests in structured Agency RMBS, which include collateralized mortgage obligations, interest only securities, inverse interest only securities and principal only securities.
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