Gamco Investors (GBL) and Arlington Asset Investment (NYSE:AI) Head-To-Head Survey

Gamco Investors (NYSE: GBL) and Arlington Asset Investment (NYSE:AI) are both small-cap finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their profitability, valuation, analyst recommendations, earnings, institutional ownership, risk and dividends.

Profitability

This table compares Gamco Investors and Arlington Asset Investment’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Gamco Investors 26.81% -63.12% 45.24%
Arlington Asset Investment -27.20% -8.36% -0.72%

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Gamco Investors and Arlington Asset Investment, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Gamco Investors 0 0 0 0 N/A
Arlington Asset Investment 0 1 2 0 2.67

Arlington Asset Investment has a consensus target price of $13.75, indicating a potential upside of 31.83%. Given Arlington Asset Investment’s higher probable upside, analysts plainly believe Arlington Asset Investment is more favorable than Gamco Investors.

Dividends

Gamco Investors pays an annual dividend of $0.08 per share and has a dividend yield of 0.3%. Arlington Asset Investment pays an annual dividend of $2.20 per share and has a dividend yield of 21.1%. Gamco Investors pays out 2.5% of its earnings in the form of a dividend. Arlington Asset Investment pays out -150.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Arlington Asset Investment has increased its dividend for 6 consecutive years. Arlington Asset Investment is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider and Institutional Ownership

25.6% of Gamco Investors shares are owned by institutional investors. Comparatively, 37.8% of Arlington Asset Investment shares are owned by institutional investors. 79.0% of Gamco Investors shares are owned by insiders. Comparatively, 5.9% of Arlington Asset Investment shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares Gamco Investors and Arlington Asset Investment’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Gamco Investors $353.00 million 2.33 $117.12 million $3.20 8.81
Arlington Asset Investment $105.34 million 2.79 -$41.34 million ($1.46) -7.14

Gamco Investors has higher revenue and earnings than Arlington Asset Investment. Arlington Asset Investment is trading at a lower price-to-earnings ratio than Gamco Investors, indicating that it is currently the more affordable of the two stocks.

Summary

Arlington Asset Investment beats Gamco Investors on 8 of the 15 factors compared between the two stocks.

About Gamco Investors

GAMCO Investors, Inc. is a holding company. The Company is a provider of investment advisory services to open and closed-end funds, institutional and private wealth management investors principally in the United States. The Company operates through the investment advisory and asset management business segment. It manages assets on a discretionary basis and invests in securities through various investment styles. Its assets under management are organized into three groups: Institutional and Private Wealth Management; Open and Closed-End Funds, and the GAMCO International SICAV (SICAV). The Company provides advisory services to a range of investors, including corporate retirement plans, foundations, endowments and private wealth clients, and also serves as sub-advisor to third-party investment funds, including registered investment companies. As of December 31, 2016, it had provided advisory services to 21 open-end funds, 15 closed-end funds and one exchange traded managed fund.

About Arlington Asset Investment

Arlington Asset Investment Corp. is an investment company. The Company focuses on acquiring and holding a levered portfolio of residential mortgage-backed securities (MBS), consisting of agency MBS and private-label MBS. Agency MBS include residential mortgage pass-through certificates for which the principal and interest payments are guaranteed by a United States Government agency or government-sponsored enterprise (GSE), such as the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac). Private-label MBS, or non-agency MBS, include residential MBS that are not guaranteed by a GSE or the United States Government. The Company funds its investments primarily through short-term financing arrangements. The Company purchases agency MBS either in initial offerings or in the secondary market through broker-dealers or similar entities. It may invest in agency MBS collateralized by adjustable-rate mortgage loans (ARMs) or hybrid ARMs.

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