Comparing AFC Gamma (NASDAQ:AFCG) & Ellington Credit (NYSE:EARN)

AFC Gamma (NASDAQ:AFCG) and Ellington Credit (NYSE:EARN) are both small-cap finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their valuation, institutional ownership, risk, dividends, earnings, profitability and analyst recommendations.

Analyst Recommendations

This is a summary of recent recommendations for AFC Gamma and Ellington Credit, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
AFC Gamma	1	3	0	1	2.20
Ellington Credit	0	1	1	0	2.50

AFC Gamma presently has a consensus price target of $5.75, indicating a potential upside of 47.06%. Ellington Credit has a consensus price target of $6.13, indicating a potential upside of 12.49%. Given AFC Gamma’s higher possible upside, equities analysts clearly believe AFC Gamma is more favorable than Ellington Credit.

Valuation & Earnings

This table compares AFC Gamma and Ellington Credit”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
AFC Gamma	$51.99 million	1.70	$16.78 million	($0.41)	-9.54
Ellington Credit	$15.07 million	13.57	$6.59 million	$0.18	30.25

AFC Gamma has higher revenue and earnings than Ellington Credit. AFC Gamma is trading at a lower price-to-earnings ratio than Ellington Credit, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares AFC Gamma and Ellington Credit’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
AFC Gamma	-25.35%	10.06%	5.78%
Ellington Credit	19.24%	15.90%	3.89%

Institutional and Insider Ownership

26.5% of AFC Gamma shares are owned by institutional investors. Comparatively, 20.4% of Ellington Credit shares are owned by institutional investors. 25.1% of AFC Gamma shares are owned by insiders. Comparatively, 1.4% of Ellington Credit 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.

Dividends

AFC Gamma pays an annual dividend of $0.60 per share and has a dividend yield of 15.3%. Ellington Credit pays an annual dividend of $0.96 per share and has a dividend yield of 17.6%. AFC Gamma pays out -146.3% of its earnings in the form of a dividend. Ellington Credit pays out 533.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Risk and Volatility

AFC Gamma has a beta of 1.04, indicating that its share price is 4% more volatile than the S&P 500. Comparatively, Ellington Credit has a beta of 1.33, indicating that its share price is 33% more volatile than the S&P 500.

Summary

Ellington Credit beats AFC Gamma on 9 of the 17 factors compared between the two stocks.

About AFC Gamma

AFC Gamma, Inc. originates, structures, underwrites, and invests in senior secured loans, and other various commercial real estate loans and debt securities for established companies operating in the cannabis industry. It primarily originates loans structured as senior loans secured by real estate, equipment, and licenses and/or other assets of the loan parties to the extent permitted by applicable laws and the regulations governing such loan parties. The company has elected and qualified to be taxed as a real estate investment trust for the United States federal income tax purposes under the Internal Revenue Code of 1986. AFC Gamma, Inc. was incorporated in 2020 and is based in West Palm Beach, Florida.

About Ellington Credit

Ellington Credit Company, a real estate investment trust, acquires, invests in, and manages residential mortgage-and real estate-related assets. It acquires and manages residential mortgage-backed securities (RMBS), including agency pools and agency collateralized mortgage obligations (CMOs); and non-agency RMBS, such as non-agency CMOs, such as investment grade and non-investment grade. The company has elected to be taxed as a real estate investment trust. As a result, it would not be subject to corporate income tax on that portion of its net income that is distributed to shareholders. The company was formerly known as Ellington Residential Mortgage REIT and changed its name to Ellington Credit Company in April 2024. Ellington Credit Company was incorporated in 2012 and is based in Old Greenwich, Connecticut.