Head-To-Head Analysis: Apollo Residential Mortgage (AMTG) vs. Western Asset Mortgage Capital Corporation (WMC)

Western Asset Mortgage Capital Corporation (NYSE: WMC) and Apollo Residential Mortgage (NYSE:AMTG) are both small-cap financials companies, but which is the better business? We will compare the two businesses based on the strength of their profitability, earnings, risk, valuation, institutional ownership, dividends and analyst recommendations.

Profitability

This table compares Western Asset Mortgage Capital Corporation and Apollo Residential Mortgage’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Western Asset Mortgage Capital Corporation 18.57% 1.81% 0.23%
Apollo Residential Mortgage 56.35% 10.11% 2.60%

Valuation & Earnings

This table compares Western Asset Mortgage Capital Corporation and Apollo Residential Mortgage’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Western Asset Mortgage Capital Corporation $91.33 million 4.64 -$25.01 million $0.60 16.83
Apollo Residential Mortgage N/A N/A N/A ($0.94) -14.51

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

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Western Asset Mortgage Capital Corporation and Apollo Residential Mortgage, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Western Asset Mortgage Capital Corporation 0 2 0 0 2.00
Apollo Residential Mortgage 0 0 0 0 N/A

Western Asset Mortgage Capital Corporation presently has a consensus target price of $10.00, indicating a potential downside of 0.99%. Given Western Asset Mortgage Capital Corporation’s higher possible upside, equities research analysts plainly believe Western Asset Mortgage Capital Corporation is more favorable than Apollo Residential Mortgage.

Insider & Institutional Ownership

41.7% of Western Asset Mortgage Capital Corporation shares are owned by institutional investors. 0.4% of Western Asset Mortgage Capital Corporation shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Dividends

Western Asset Mortgage Capital Corporation pays an annual dividend of $1.24 per share and has a dividend yield of 12.3%. Apollo Residential Mortgage pays an annual dividend of $1.92 per share and has a dividend yield of 14.1%. Western Asset Mortgage Capital Corporation pays out 206.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Apollo Residential Mortgage pays out -204.3% of its earnings in the form of a dividend. Western Asset Mortgage Capital Corporation has raised its dividend for 2 consecutive years. Apollo Residential Mortgage is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility and Risk

Western Asset Mortgage Capital Corporation has a beta of 0.73, indicating that its share price is 27% less volatile than the S&P 500. Comparatively, Apollo Residential Mortgage has a beta of 0.62, indicating that its share price is 38% less volatile than the S&P 500.

Summary

Western Asset Mortgage Capital Corporation beats Apollo Residential Mortgage on 7 of the 12 factors compared between the two stocks.

Western Asset Mortgage Capital Corporation Company Profile

Western Asset Mortgage Capital Corporation is a real estate investment trust. The Company is focused on investing in, financing and managing a diversified portfolio of real estate-related securities, whole-loans and other financial assets. The Company’s portfolio includes Agency residential mortgage-backed securities (RMBS), including Mortgage pass-through certificates, Agency derivatives, Agency Interest-Only Strips and Agency collateralized mortgage obligations (CMOs); Non-Agency RMBS, and Agency commercial mortgage-backed securities (CMBS), Non-Agency CMBS, Non United States CMBS and asset-backed securities (ABS), as well as Residential and Commercial Whole-Loans. The Company may utilize to-be-announced forward contracts (TBAs), in order to invest in Agency RMBS. The Company’s manager is Western Asset Management Company.

Apollo Residential Mortgage Company Profile

Apollo Residential Mortgage, Inc. is a holding company that conducts its business primarily through ARM Operating, LLC and other operating subsidiaries. The Company is primarily engaged in the business of investing in residential mortgage assets in the United States. The Company seeks to generate risk-adjusted returns from its assets to its stockholders over the long term, primarily through dividend distributions and secondarily through capital appreciation. The Company’s portfolio consists of agency residential mortgage-backed securities (RMBS), non-Agency RMBS; securitized mortgage loans, and other mortgage and mortgage related investment securities and other mortgage related investments. The Company may invest in a range of other residential mortgage and mortgage-related assets. The Company is externally managed and advised by ARM Manager, LLC, an indirect subsidiary of Apollo Global Management, LLC.

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