Federal Agricultural Mortgage (NYSE:AGM – Get Free Report) and Essent Group (NYSE:ESNT – Get Free Report) are both mid-cap finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, analyst recommendations, institutional ownership, earnings, risk, dividends and valuation.
Dividends
Federal Agricultural Mortgage pays an annual dividend of $6.40 per share and has a dividend yield of 2.9%. Essent Group pays an annual dividend of $1.40 per share and has a dividend yield of 2.1%. Federal Agricultural Mortgage pays out 35.0% of its earnings in the form of a dividend. Essent Group pays out 19.5% 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. Federal Agricultural Mortgage has increased its dividend for 14 consecutive years and Essent Group has increased its dividend for 6 consecutive years. Federal Agricultural Mortgage is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Insider and Institutional Ownership
68.0% of Federal Agricultural Mortgage shares are owned by institutional investors. Comparatively, 93.0% of Essent Group shares are owned by institutional investors. 1.9% of Federal Agricultural Mortgage shares are owned by company insiders. Comparatively, 3.6% of Essent Group shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.
Analyst Recommendations
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Federal Agricultural Mortgage | 0 | 1 | 1 | 1 | 3.00 |
| Essent Group | 0 | 5 | 3 | 0 | 2.38 |
Federal Agricultural Mortgage currently has a consensus target price of $255.00, indicating a potential upside of 14.97%. Essent Group has a consensus target price of $71.86, indicating a potential upside of 5.52%. Given Federal Agricultural Mortgage’s stronger consensus rating and higher probable upside, analysts clearly believe Federal Agricultural Mortgage is more favorable than Essent Group.
Profitability
This table compares Federal Agricultural Mortgage and Essent Group’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Federal Agricultural Mortgage | 29.98% | 18.90% | 0.63% |
| Essent Group | 51.45% | 11.91% | 9.09% |
Valuation and Earnings
This table compares Federal Agricultural Mortgage and Essent Group”s gross revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Federal Agricultural Mortgage | $410.30 million | 5.87 | $207.41 million | $18.31 | 12.11 |
| Essent Group | $1.26 billion | 4.85 | $689.97 million | $7.17 | 9.50 |
Essent Group has higher revenue and earnings than Federal Agricultural Mortgage. Essent Group is trading at a lower price-to-earnings ratio than Federal Agricultural Mortgage, indicating that it is currently the more affordable of the two stocks.
Volatility & Risk
Federal Agricultural Mortgage has a beta of 0.98, suggesting that its share price is 2% less volatile than the S&P 500. Comparatively, Essent Group has a beta of 0.76, suggesting that its share price is 24% less volatile than the S&P 500.
Summary
Federal Agricultural Mortgage beats Essent Group on 10 of the 18 factors compared between the two stocks.
About Federal Agricultural Mortgage
Federal Agricultural Mortgage Corporation provides a secondary market for various loans made to borrowers in the United States. It operates through four segments: Corporate AgFinance, Farm & Ranch, Rural Utilities, and Renewable Energy. The company’s Agricultural Finance line of business engages in purchasing and retaining eligible loans and securities; guaranteeing the payment of principal and interest on securities that represent interests in or obligations secured by pools of eligible loans; servicing eligible loans; and issuing LTSPCs for eligible loans. Its Rural Infrastructure Finance line of business is involved in the purchase of rural utilities loans and renewable energy loans and guarantees of securities backed by loans, as well as LTSPCs for pools of eligible rural utilities loans; by loans for electric or telecommunications facilities by lenders organized as cooperatives to borrowers; and other financial institutions that are secured by pools of eligible loans. Federal Agricultural Mortgage Corporation was incorporated in 1987 and is headquartered in Washington, the District of Columbia.
About Essent Group
Essent Group Ltd., through its subsidiaries, provides private mortgage insurance and reinsurance for mortgages secured by residential properties located in the United States. Its mortgage insurance products include primary, pool, and master policy. The company also provides information technology maintenance and development services; customer support-related services; underwriting consulting; and contract underwriting services, as well as risk management products and title insurance and settlement services. It serves the originators of residential mortgage loans, such as regulated depository institutions, mortgage banks, credit unions, and other lenders. Essent Group Ltd. was incorporated in 2008 and is based in Hamilton, Bermuda.
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