Reviewing Great Ajax (NYSE:AJX) & Hatteras Financial (HTS)

Hatteras Financial (NYSE: HTS) and Great Ajax (NYSE:AJX) are both small-cap financials companies, but which is the better investment? We will contrast the two companies based on the strength of their earnings, profitability, dividends, analyst recommendations, valuation, risk and institutional ownership.

Earnings and Valuation

This table compares Hatteras Financial and Great Ajax’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Hatteras Financial N/A N/A N/A ($0.09) -181.00
Great Ajax $44.69 million 5.64 $27.83 million $1.53 9.03

Great Ajax has higher revenue and earnings than Hatteras Financial. Hatteras Financial is trading at a lower price-to-earnings ratio than Great Ajax, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Hatteras Financial and Great Ajax, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Hatteras Financial 0 0 0 0 N/A
Great Ajax 0 1 3 0 2.75

Great Ajax has a consensus target price of $14.75, indicating a potential upside of 6.73%. Given Great Ajax’s higher possible upside, analysts plainly believe Great Ajax is more favorable than Hatteras Financial.

Institutional & Insider Ownership

71.4% of Great Ajax shares are held by institutional investors. 3.8% of Great Ajax shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Dividends

Hatteras Financial pays an annual dividend of $1.80 per share and has a dividend yield of 11.0%. Great Ajax pays an annual dividend of $1.20 per share and has a dividend yield of 8.7%. Hatteras Financial pays out -2,000.0% of its earnings in the form of a dividend. Great Ajax pays out 78.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Hatteras Financial is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Hatteras Financial and Great Ajax’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Hatteras Financial N/A -16.93% -1.89%
Great Ajax 55.23% 10.04% 2.77%

Summary

Great Ajax beats Hatteras Financial on 10 of the 12 factors compared between the two stocks.

About Hatteras Financial

Hatteras Financial Corp. is an externally managed mortgage real estate investment trust (REIT) that invests in single-family residential mortgage real estate assets, such as mortgage-backed security (MBS), mortgage servicing right (MSR), residential mortgage loans and other financial assets. MBS are pass-through securities consisting of a pool of mortgage loans. Its primary business is owning and managing agency securities, with a primary focus on adjustable-rate mortgage securities. Its primary investment assets include Agency MBS; other agency issued securities, such as credit-risk transfer bonds; MSR; non-agency securities; residential mortgage loans, and other real estate related assets as permitted by its investment guidelines and REIT requirements. Its business operations consist of the Hatteras Financial Corp., Onslow Bay Financial LLC, First Winston Securities, Inc. and Wind River TRS LLC. It is externally managed and advised by its manager, Atlantic Capital Advisors LLC.

About Great Ajax

Great Ajax Corp. is an externally managed real estate company. The Company is focused on acquiring, investing in and managing a portfolio of re-performing and non-performing mortgage loans secured by single-family residences and single-family properties. Its segment is focused on non-performing mortgages and re-performing mortgages. It also invests in loans secured by multi-family residential and commercial mixed use retail/residential properties, as well as in the properties directly. It also holds real estate-owned properties (REO) acquired upon the foreclosure or other settlement of its owned non-performing loans, as well as through outright purchases. It is managed by Thetis Asset Management LLC, an affiliated entity. Its mortgage loans and other real estate assets are serviced by Gregory Funding LLC, an affiliated entity. The Company conducts its business through its operating partnership, Great Ajax Operating Partnership L.P.

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