Financial Comparison: Western Asset Mortgage Capital (WMC) vs. Ladder Capital (LADR)

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

Dividends

Western Asset Mortgage Capital pays an annual dividend of $1.24 per share and has a dividend yield of 12.4%. Ladder Capital pays an annual dividend of $1.26 per share and has a dividend yield of 9.3%. Western Asset Mortgage Capital 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. Ladder Capital pays out 144.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Western Asset Mortgage Capital has raised its dividend for 2 consecutive years. Western Asset Mortgage Capital is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation & Earnings

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Western Asset Mortgage Capital $91.33 million 4.59 -$25.01 million $0.60 16.67
Ladder Capital $399.68 million 3.77 $66.72 million $0.87 15.62

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

Insider and Institutional Ownership

43.0% of Western Asset Mortgage Capital shares are held by institutional investors. Comparatively, 46.2% of Ladder Capital shares are held by institutional investors. 0.4% of Western Asset Mortgage Capital shares are held by insiders. Comparatively, 12.5% of Ladder Capital shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Risk and Volatility

Western Asset Mortgage Capital has a beta of 0.71, indicating that its stock price is 29% less volatile than the S&P 500. Comparatively, Ladder Capital has a beta of 1.03, indicating that its stock price is 3% more volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
Western Asset Mortgage Capital 18.57% 1.81% 0.23%
Ladder Capital 27.24% 8.57% 1.93%

Analyst Ratings

This is a breakdown of recent ratings for Western Asset Mortgage Capital and Ladder Capital, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Western Asset Mortgage Capital 0 1 0 0 2.00
Ladder Capital 0 0 4 0 3.00

Ladder Capital has a consensus target price of $16.25, indicating a potential upside of 19.57%. Given Ladder Capital’s stronger consensus rating and higher probable upside, analysts plainly believe Ladder Capital is more favorable than Western Asset Mortgage Capital.

Summary

Ladder Capital beats Western Asset Mortgage Capital on 13 of the 17 factors compared between the two stocks.

Western Asset Mortgage Capital 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.

Ladder Capital Company Profile

Ladder Capital Corp is a commercial real estate finance company. The Company’s segments include loans, securities, real estate and corporate/other. The loans segment includes mortgage loan receivables held for investment (balance sheet loans) and mortgage loan receivables held for sale (conduit loans). The securities segment consists of all of its activities related to commercial real estate securities, which include investments in commercial mortgage-backed securities (CMBS) and United States Agency Securities. The real estate segment includes net leased properties, office buildings, a warehouse and condominium units. The Corporate/other segment includes the Company’s investments in joint ventures, other asset management activities and operating expenses. The Company invests primarily in loans, securities and other interests in the United States commercial real estate, with a focus on senior secured assets.

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