Critical Survey: Adamas Trust (NASDAQ:ADAM) & Annaly Capital Management (NYSE:NLY)

Annaly Capital Management (NYSE:NLY) and Adamas Trust (NASDAQ:ADAM) are both finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their institutional ownership, profitability, earnings, risk, dividends, valuation and analyst recommendations.

Earnings & Valuation

This table compares Annaly Capital Management and Adamas Trust”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Annaly Capital Management	$5.96 billion	2.66	$2.03 billion	$3.99	5.28
Adamas Trust	$601.95 million	1.33	$149.05 million	$1.68	5.30

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

Insider and Institutional Ownership

51.6% of Annaly Capital Management shares are owned by institutional investors. Comparatively, 54.9% of Adamas Trust shares are owned by institutional investors. 0.2% of Annaly Capital Management shares are owned by company insiders. Comparatively, 2.0% of Adamas Trust shares are owned 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.

Risk and Volatility

Annaly Capital Management has a beta of 1.16, indicating that its stock price is 16% more volatile than the S&P 500. Comparatively, Adamas Trust has a beta of 1.18, indicating that its stock price is 18% more volatile than the S&P 500.

Profitability

This table compares Annaly Capital Management and Adamas Trust’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Annaly Capital Management	43.66%	16.00%	1.69%
Adamas Trust	29.82%	14.72%	1.04%

Analyst Ratings

This is a breakdown of current recommendations and price targets for Annaly Capital Management and Adamas Trust, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Annaly Capital Management	0	4	7	1	2.75
Adamas Trust	0	4	1	1	2.50

Annaly Capital Management currently has a consensus price target of $24.33, indicating a potential upside of 15.52%. Adamas Trust has a consensus price target of $9.50, indicating a potential upside of 6.62%. Given Annaly Capital Management’s stronger consensus rating and higher possible upside, analysts clearly believe Annaly Capital Management is more favorable than Adamas Trust.

Dividends

Annaly Capital Management pays an annual dividend of $3.00 per share and has a dividend yield of 14.2%. Adamas Trust pays an annual dividend of $1.08 per share and has a dividend yield of 12.1%. Annaly Capital Management pays out 75.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Adamas Trust pays out 64.3% of its earnings in the form of a dividend. Annaly Capital Management has increased its dividend for 2 consecutive years. Annaly Capital Management is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Annaly Capital Management beats Adamas Trust on 12 of the 17 factors compared between the two stocks.

About Annaly Capital Management

Annaly Capital Management, Inc., a diversified capital manager, engages in mortgage finance. The company invests in agency mortgage-backed securities collateralized by residential mortgages; non-agency residential whole loans and securitized products within the residential and commercial markets; mortgage servicing rights; agency commercial mortgage-backed securities; to-be-announced forward contracts; residential mortgage loans; and agency or private label credit risk transfer securities. It has elected to be taxed as a real estate investment trust (REIT). As a REIT, it is not subject to federal income tax to the extent that it distributes its taxable income to its shareholders. The company was incorporated in 1996 and is based in New York, New York.

About Adamas Trust

New York Mortgage Trust, Inc. acquires, invests in, finances, and manages mortgage-related single-family and multi-family residential assets in the United States. Its targeted investments include residential loans, second mortgages, and business purpose loans; structured multi-family property investments, such as preferred equity in, and mezzanine loans to owners of multi-family properties, as well as joint venture equity investments in multi-family properties; non-agency residential mortgage-backed securities (RMBS); agency RMBS; commercial mortgage-backed securities (CMBS); and other mortgage, residential housing, and credit-related 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 incorporated in 2003 and is headquartered in New York, New York.