Comparing Federal Agricultural Mortgage (NYSE:AGM) and Burford Capital (NYSE:BUR)

Burford Capital (NYSE:BUR) and Federal Agricultural Mortgage (NYSE:AGM) are both finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their risk, analyst recommendations, valuation, earnings, institutional ownership, profitability and dividends.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Burford Capital and Federal Agricultural Mortgage, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Burford Capital	2	2	2	0	2.00
Federal Agricultural Mortgage	0	1	1	1	3.00

Burford Capital currently has a consensus target price of $9.33, suggesting a potential upside of 115.05%. Federal Agricultural Mortgage has a consensus target price of $255.00, suggesting a potential upside of 11.95%. Given Burford Capital’s higher probable upside, research analysts clearly believe Burford Capital is more favorable than Federal Agricultural Mortgage.

Earnings & Valuation

This table compares Burford Capital and Federal Agricultural Mortgage”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Burford Capital	$413.36 million	2.31	$62.57 million	($7.71)	-0.56
Federal Agricultural Mortgage	$410.30 million	6.02	$207.41 million	$18.31	12.44

Federal Agricultural Mortgage has lower revenue, but higher earnings than Burford Capital. Burford Capital 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.

Insider & Institutional Ownership

68.0% of Federal Agricultural Mortgage shares are held by institutional investors. 8.9% of Burford Capital shares are held by company insiders. Comparatively, 1.9% of Federal Agricultural Mortgage shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares Burford Capital and Federal Agricultural Mortgage’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Burford Capital	15.14%	10.24%	4.35%
Federal Agricultural Mortgage	29.98%	18.90%	0.63%

Risk & Volatility

Burford Capital has a beta of 1.25, meaning that its share price is 25% more volatile than the S&P 500. Comparatively, Federal Agricultural Mortgage has a beta of 0.97, meaning that its share price is 3% less volatile than the S&P 500.

Dividends

Burford Capital pays an annual dividend of $0.12 per share and has a dividend yield of 2.8%. Federal Agricultural Mortgage pays an annual dividend of $6.40 per share and has a dividend yield of 2.8%. Burford Capital pays out -1.6% of its earnings in the form of a dividend. Federal Agricultural Mortgage pays out 35.0% 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 raised its dividend for 14 consecutive years. Federal Agricultural Mortgage is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Federal Agricultural Mortgage beats Burford Capital on 11 of the 18 factors compared between the two stocks.

About Burford Capital

Burford Capital Limited provides legal finance products and services worldwide. The company operates through two segments, Capital Provision, and Asset Management and Other Provision. The Capital Provision segment provides capital to the legal industry or in connection with legal matters directly and through investment in private funds; legal risk management services; lower risk legal finance business focusing on pre-settlement litigation matters with lower risk and lower expected returns; post-settlement finance; and complex strategies in which it acts as a principal and acquires assets that are mispriced. The Asset Management and Other Services segment provides services to the legal industry, including litigation insurance. Burford Capital Limited was incorporated in 2009 and is based in Saint Peter Port, Guernsey.

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.