Invesco Mortgage Capital (NYSE: IVR) and PennyMac Mortgage Investment Trust (NYSE:PMT) are both small-cap finance companies, but which is the better investment? We will compare the two companies based on the strength of their analyst recommendations, valuation, dividends, profitability, earnings, institutional ownership and risk.

Profitability

This table compares Invesco Mortgage Capital and PennyMac Mortgage Investment Trust’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Invesco Mortgage Capital 71.92% 8.97% 1.11%
PennyMac Mortgage Investment Trust 37.97% 8.67% 1.95%

Risk and Volatility

Invesco Mortgage Capital has a beta of 0.81, meaning that its share price is 19% less volatile than the S&P 500. Comparatively, PennyMac Mortgage Investment Trust has a beta of 0.49, meaning that its share price is 51% less volatile than the S&P 500.

Earnings & Valuation

This table compares Invesco Mortgage Capital and PennyMac Mortgage Investment Trust’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Invesco Mortgage Capital $609.31 million 3.15 $484.39 million $4.34 3.97
PennyMac Mortgage Investment Trust $318.72 million 3.37 $114.30 million $1.71 9.39

Invesco Mortgage Capital has higher revenue and earnings than PennyMac Mortgage Investment Trust. Invesco Mortgage Capital is trading at a lower price-to-earnings ratio than PennyMac Mortgage Investment Trust, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Invesco Mortgage Capital and PennyMac Mortgage Investment Trust, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Invesco Mortgage Capital 0 2 2 0 2.50
PennyMac Mortgage Investment Trust 0 4 2 0 2.33

Invesco Mortgage Capital presently has a consensus price target of $17.75, indicating a potential upside of 3.08%. PennyMac Mortgage Investment Trust has a consensus price target of $17.00, indicating a potential upside of 5.85%. Given PennyMac Mortgage Investment Trust’s higher probable upside, analysts clearly believe PennyMac Mortgage Investment Trust is more favorable than Invesco Mortgage Capital.

Insider & Institutional Ownership

63.1% of Invesco Mortgage Capital shares are owned by institutional investors. Comparatively, 63.3% of PennyMac Mortgage Investment Trust shares are owned by institutional investors. 0.3% of Invesco Mortgage Capital shares are owned by company insiders. Comparatively, 1.8% of PennyMac Mortgage Investment Trust shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Dividends

Invesco Mortgage Capital pays an annual dividend of $1.64 per share and has a dividend yield of 9.5%. PennyMac Mortgage Investment Trust pays an annual dividend of $1.88 per share and has a dividend yield of 11.7%. Invesco Mortgage Capital pays out 37.8% of its earnings in the form of a dividend. PennyMac Mortgage Investment Trust pays out 109.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Summary

Invesco Mortgage Capital beats PennyMac Mortgage Investment Trust on 8 of the 15 factors compared between the two stocks.

About Invesco Mortgage Capital

Invesco Mortgage Capital Inc. is a holding company, which conducts its businesses through IAS Operating Partnership LP (the Operating Partnership) and subsidiaries. The Company’s objective is to provide risk-adjusted returns to its investors through dividends and through capital appreciation. It invests in residential mortgage-backed securities that are guaranteed by the United States Government agency, such as the Government National Mortgage Association or a federally chartered corporation, such as the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation (collectively Agency RMBS); RMBS that are not guaranteed by the United States Government agency; Credit risk transfer securities that are unsecured obligations issued by government-sponsored enterprises; commercial mortgage-backed securities; residential and commercial mortgage loans, and other real estate-related financing arrangements. It is externally managed and advised by Invesco Advisers, Inc.

About PennyMac Mortgage Investment Trust

PennyMac Mortgage Investment Trust is a specialty finance company that invests primarily in residential mortgage loans and mortgage-related assets. The Company conducts all of its operations, and makes all of its investments, through PennyMac Operating Partnership, L.P. (its Operating Partnership) and its subsidiaries. It operates through two segments: correspondent production and investment activities. Its investment activities segment represents the Company’s investments in mortgage-related assets. The correspondent production segment represents the Company’s operations aimed at serving as an intermediary between mortgage lenders and the capital markets by purchasing, pooling and reselling newly originated prime credit quality mortgage loans either directly or in the form of MBS, using the services of PNMAC Capital Management (the Manager or PCM) and PennyMac Loan Services, LLC (PLS), both indirect subsidiaries of PennyMac Financial Services, Inc. (PFSI or PennyMac).

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