Analyzing Western Asset Mortgage Capital (NYSE:WMC) & Monmouth Real Estate Investment (NYSE:MNR)

Western Asset Mortgage Capital (NYSE:WMC) and Monmouth Real Estate Investment (NYSE:MNR) are both small-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their risk, valuation, institutional ownership, earnings, dividends, analyst recommendations and profitability.

Analyst Ratings

This is a summary of recent recommendations for Western Asset Mortgage Capital and Monmouth Real Estate Investment, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Western Asset Mortgage Capital 1 0 0 0 1.00
Monmouth Real Estate Investment 1 1 3 0 2.40

Western Asset Mortgage Capital currently has a consensus price target of $2.00, indicating a potential downside of 31.74%. Monmouth Real Estate Investment has a consensus price target of $15.80, indicating a potential upside of 8.74%. Given Monmouth Real Estate Investment’s stronger consensus rating and higher probable upside, analysts clearly believe Monmouth Real Estate Investment is more favorable than Western Asset Mortgage Capital.

Earnings & Valuation

This table compares Western Asset Mortgage Capital and Monmouth Real Estate Investment’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Western Asset Mortgage Capital $217.26 million 0.82 $70.70 million $1.21 2.42
Monmouth Real Estate Investment $158.52 million 8.98 $29.80 million $0.85 17.09

Western Asset Mortgage Capital has higher revenue and earnings than Monmouth Real Estate Investment. Western Asset Mortgage Capital is trading at a lower price-to-earnings ratio than Monmouth Real Estate Investment, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Western Asset Mortgage Capital and Monmouth Real Estate Investment’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Western Asset Mortgage Capital -184.72% 13.70% 1.29%
Monmouth Real Estate Investment 1.56% 0.41% 0.14%

Dividends

Western Asset Mortgage Capital pays an annual dividend of $0.20 per share and has a dividend yield of 6.8%. Monmouth Real Estate Investment pays an annual dividend of $0.68 per share and has a dividend yield of 4.7%. Western Asset Mortgage Capital pays out 16.5% of its earnings in the form of a dividend. Monmouth Real Estate Investment pays out 80.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Monmouth Real Estate Investment has raised its dividend for 1 consecutive years. Western Asset Mortgage Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider & Institutional Ownership

33.3% of Western Asset Mortgage Capital shares are owned by institutional investors. Comparatively, 70.6% of Monmouth Real Estate Investment shares are owned by institutional investors. 0.6% of Western Asset Mortgage Capital shares are owned by insiders. Comparatively, 3.9% of Monmouth Real Estate Investment shares are owned 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.

Risk and Volatility

Western Asset Mortgage Capital has a beta of 1.62, indicating that its share price is 62% more volatile than the S&P 500. Comparatively, Monmouth Real Estate Investment has a beta of 0.75, indicating that its share price is 25% less volatile than the S&P 500.

Summary

Western Asset Mortgage Capital beats Monmouth Real Estate Investment on 9 of the 17 factors compared between the two stocks.

About Western Asset Mortgage Capital

Western Asset Mortgage Capital Corporation operates as a real estate investment trust in the United States. It focuses on acquiring, investing in, financing, and managing a portfolio of agency and non-agency residential mortgage-backed securities and commercial mortgage-backed securities, residential whole-loans, residential bridge loans, securitized commercial loans, and other financial assets. 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 founded in 2009 and is based in Pasadena, California.

About Monmouth Real Estate Investment

Monmouth Real Estate Investment Corporation, founded in 1968, is one of the oldest public equity REITs in the world. We specialize in single tenant, net-leased industrial properties, subject to long-term leases, primarily to investment-grade tenants. Monmouth Real Estate is a fully integrated and self-managed real estate company, whose property portfolio consists of 118 properties containing a total of approximately 23.3 million rentable square feet, geographically diversified across 31 states.

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