Financial Review: ARMOUR Residential REIT (NYSE:ARR) vs. AFC Gamma (NASDAQ:AFCG)

ARMOUR Residential REIT (NYSE:ARR) and AFC Gamma (NASDAQ:AFCG) are both finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their risk, valuation, analyst recommendations, institutional ownership, earnings, profitability and dividends.

Risk and Volatility

ARMOUR Residential REIT has a beta of 1.44, meaning that its stock price is 44% more volatile than the S&P 500. Comparatively, AFC Gamma has a beta of 1.03, meaning that its stock price is 3% more volatile than the S&P 500.

Institutional and Insider Ownership

54.2% of ARMOUR Residential REIT shares are owned by institutional investors. Comparatively, 26.5% of AFC Gamma shares are owned by institutional investors. 0.4% of ARMOUR Residential REIT shares are owned by insiders. Comparatively, 25.1% of AFC Gamma shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Dividends

ARMOUR Residential REIT pays an annual dividend of $2.88 per share and has a dividend yield of 15.9%. AFC Gamma pays an annual dividend of $0.60 per share and has a dividend yield of 19.8%. ARMOUR Residential REIT pays out 7,200.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. AFC Gamma pays out -57.7% of its earnings in the form of a dividend. AFC Gamma is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a summary of recent recommendations for ARMOUR Residential REIT and AFC Gamma, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
ARMOUR Residential REIT	2	5	2	0	2.00
AFC Gamma	1	4	0	0	1.80

ARMOUR Residential REIT presently has a consensus price target of $17.25, indicating a potential downside of 5.03%. AFC Gamma has a consensus price target of $5.75, indicating a potential upside of 89.77%. Given AFC Gamma’s higher probable upside, analysts clearly believe AFC Gamma is more favorable than ARMOUR Residential REIT.

Earnings & Valuation

This table compares ARMOUR Residential REIT and AFC Gamma”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
ARMOUR Residential REIT	$73.06 million	27.82	-$14.39 million	$0.04	454.10
AFC Gamma	$51.99 million	1.32	$16.78 million	($1.04)	-2.91

AFC Gamma has lower revenue, but higher earnings than ARMOUR Residential REIT. AFC Gamma is trading at a lower price-to-earnings ratio than ARMOUR Residential REIT, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares ARMOUR Residential REIT and AFC Gamma’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
ARMOUR Residential REIT	9.01%	15.37%	1.63%
AFC Gamma	-70.46%	8.45%	4.90%

Summary

ARMOUR Residential REIT beats AFC Gamma on 10 of the 16 factors compared between the two stocks.

About ARMOUR Residential REIT

ARMOUR Residential REIT, Inc. invests in residential mortgage-backed securities (MBS) in the United States. Its securities portfolio primarily consists of the United States Government-sponsored entity's (GSE) and the Government National Mortgage Administration's issued or guaranteed securities backed by fixed rate, hybrid adjustable rate, and adjustable-rate home loans; and unsecured notes and bonds issued by the GSE and the United States treasuries, as well as money market instruments. The company has elected to be taxed as a real estate investment trust. As a result, it would not be subject to corporate income tax on that portion of its net income that is distributed to shareholders. ARMOUR Residential REIT, Inc. was incorporated in 2008 and is based in Vero Beach, Florida.

About AFC Gamma

AFC Gamma, Inc. originates, structures, underwrites, and invests in senior secured loans, and other various commercial real estate loans and debt securities for established companies operating in the cannabis industry. It primarily originates loans structured as senior loans secured by real estate, equipment, and licenses and/or other assets of the loan parties to the extent permitted by applicable laws and the regulations governing such loan parties. The company has elected and qualified to be taxed as a real estate investment trust for the United States federal income tax purposes under the Internal Revenue Code of 1986. AFC Gamma, Inc. was incorporated in 2020 and is based in West Palm Beach, Florida.