Analyzing Cherry Hill Mortgage Investment (NYSE:CHMI) & Two Harbors Investments (NYSE:TWO)

Two Harbors Investments (NYSE:TWO) and Cherry Hill Mortgage Investment (NYSE:CHMI) are both small-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, analyst recommendations, institutional ownership, risk, profitability, earnings and valuation.

Earnings and Valuation

This table compares Two Harbors Investments and Cherry Hill Mortgage Investment”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Two Harbors Investments	$412.00 million	3.21	-$454.30 million	($3.82)	-3.30
Cherry Hill Mortgage Investment	$61.10 million	1.47	$6.83 million	$0.11	22.23

Cherry Hill Mortgage Investment has lower revenue, but higher earnings than Two Harbors Investments. Two Harbors Investments is trading at a lower price-to-earnings ratio than Cherry Hill Mortgage Investment, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

64.2% of Two Harbors Investments shares are held by institutional investors. Comparatively, 18.5% of Cherry Hill Mortgage Investment shares are held by institutional investors. 0.7% of Two Harbors Investments shares are held by company insiders. Comparatively, 1.5% of Cherry Hill Mortgage Investment shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares Two Harbors Investments and Cherry Hill Mortgage Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Two Harbors Investments	-87.72%	13.62%	1.44%
Cherry Hill Mortgage Investment	18.88%	17.95%	1.52%

Volatility and Risk

Two Harbors Investments has a beta of 1.03, suggesting that its share price is 3% more volatile than the S&P 500. Comparatively, Cherry Hill Mortgage Investment has a beta of 0.98, suggesting that its share price is 2% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Two Harbors Investments and Cherry Hill Mortgage Investment, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Two Harbors Investments	2	6	0	0	1.75
Cherry Hill Mortgage Investment	1	1	2	0	2.25

Two Harbors Investments currently has a consensus price target of $12.25, indicating a potential downside of 2.74%. Cherry Hill Mortgage Investment has a consensus price target of $3.00, indicating a potential upside of 22.70%. Given Cherry Hill Mortgage Investment’s stronger consensus rating and higher possible upside, analysts clearly believe Cherry Hill Mortgage Investment is more favorable than Two Harbors Investments.

Dividends

Two Harbors Investments pays an annual dividend of $1.36 per share and has a dividend yield of 10.8%. Cherry Hill Mortgage Investment pays an annual dividend of $0.40 per share and has a dividend yield of 16.4%. Two Harbors Investments pays out -35.6% of its earnings in the form of a dividend. Cherry Hill Mortgage Investment pays out 363.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Two Harbors Investments has raised its dividend for 1 consecutive years and Cherry Hill Mortgage Investment has raised its dividend for 1 consecutive years.

Summary

Cherry Hill Mortgage Investment beats Two Harbors Investments on 11 of the 16 factors compared between the two stocks.

About Two Harbors Investments

Two Harbors Investment Corp. invests in, finances, and manages mortgage servicing rights (MSRs), agency residential mortgage-backed securities (RMBS), and other financial assets through RoundPoint in the United States. The company target assets include agency RMBS collateralized by fixed rate mortgage loans, adjustable rate mortgage loans, hybrid mortgage loans, or derivatives; and other assets, such as financial and mortgage-related assets, including non-agency securities and non-hedging transactions. It qualifies as a REIT for federal income tax purposes. As a REIT, the company must distribute at least 90% of annual taxable income to its stockholders. Two Harbors Investment Corp. was incorporated in 2009 and is headquartered in St. Louis Park, Minnesota.

About Cherry Hill Mortgage Investment

Cherry Hill Mortgage Investment Corporation, a residential real estate finance company, acquires, invests in, and manages residential mortgage assets in the United States. It operates through Investments in RMBS (residential mortgage-backed securities) and Investments in Servicing Related Assets segments. Cherry Hill Mortgage Investment Corporation qualifies as a real estate investment trust for federal income tax purposes. The company generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. Cherry Hill Mortgage Investment Corporation was incorporated in 2012 and is based in Farmingdale, New Jersey.