Analyzing Ellington Financial (NYSE:EFC) and BrightSpire Capital (NYSE:BRSP)

BrightSpire Capital (NYSE:BRSP) and Ellington Financial (NYSE:EFC) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their profitability, earnings, dividends, risk, valuation, analyst recommendations and institutional ownership.

Analyst Ratings

This is a summary of recent ratings and recommmendations for BrightSpire Capital and Ellington Financial, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
BrightSpire Capital	2	0	5	0	2.43
Ellington Financial	0	3	4	0	2.57

BrightSpire Capital presently has a consensus target price of $6.40, suggesting a potential upside of 6.84%. Ellington Financial has a consensus target price of $14.55, suggesting a potential upside of 13.36%. Given Ellington Financial’s stronger consensus rating and higher probable upside, analysts clearly believe Ellington Financial is more favorable than BrightSpire Capital.

Insider and Institutional Ownership

56.6% of BrightSpire Capital shares are held by institutional investors. Comparatively, 55.6% of Ellington Financial shares are held by institutional investors. 2.4% of BrightSpire Capital shares are held by insiders. Comparatively, 4.1% of Ellington Financial shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Volatility and Risk

BrightSpire Capital has a beta of 1.38, meaning that its share price is 38% more volatile than the S&P 500. Comparatively, Ellington Financial has a beta of 0.95, meaning that its share price is 5% less volatile than the S&P 500.

Profitability

This table compares BrightSpire Capital and Ellington Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
BrightSpire Capital	-26.91%	7.51%	2.16%
Ellington Financial	89.04%	14.55%	1.15%

Valuation & Earnings

This table compares BrightSpire Capital and Ellington Financial”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
BrightSpire Capital	$244.77 million	3.17	-$131.98 million	($0.30)	-19.97
Ellington Financial	$136.41 million	10.90	$145.86 million	$1.34	9.58

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

Dividends

BrightSpire Capital pays an annual dividend of $0.64 per share and has a dividend yield of 10.7%. Ellington Financial pays an annual dividend of $1.56 per share and has a dividend yield of 12.2%. BrightSpire Capital pays out -213.3% of its earnings in the form of a dividend. Ellington Financial pays out 116.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Summary

Ellington Financial beats BrightSpire Capital on 10 of the 16 factors compared between the two stocks.

About BrightSpire Capital

BrightSpire Capital, Inc. operates as a commercial real estate (CRE) credit real estate investment trust in the United States and Europe. The company operates through Senior and Mezzanine Loans and Preferred Equity; Net Leased and Other Real Estate; and Corporate and Other segments. It focuses on originating, acquiring, financing, and managing a diversified portfolio of CRE debt investments consisting of first mortgage loans, senior loans, debt securities, mezzanine loans, and preferred equity investments, as well as net leased properties. The company qualifies as a real estate investment trust for federal income tax purposes. It generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. The company was formerly known as Colony Credit Real Estate, Inc. and changed its name to BrightSpire Capital, Inc. in June 2021. BrightSpire Capital, Inc. was incorporated in 2017 and is headquartered in New York, New York.

About Ellington Financial

Ellington Financial Inc., through its subsidiary, Ellington Financial Operating Partnership LLC, acquires and manages mortgage-related, consumer-related, corporate-related, and other financial assets in the United States. The company acquires and manages residential mortgage-backed securities (RMBS) backed by prime jumbo, Alt-A, manufactured housing, and subprime mortgage; RMBS for which the principal and interest payments are guaranteed by the U.S. government agency or the U.S. government-sponsored entity; residential mortgage loans; commercial mortgage-backed securities; and commercial mortgage loans and other commercial real estate debt. It also provides collateralized loan obligations; mortgage-related and non-mortgage-related derivatives; corporate debt and equity securities; corporate loans; and other strategic investments; and consumer loans and asset-backed securities backed by consumer and commercial assets. The company qualifies as a real estate investment trust (REIT) for federal income tax purposes. As a REIT, it intends to distribute at least 90% of its taxable income as dividends to shareholders. Ellington Financial LLC was incorporated in 2007 and is headquartered in Old Greenwich, Connecticut.