Analyzing Orchid Island Capital (NYSE:ORC) and AFC Gamma (NASDAQ:AFCG)

AFC Gamma (NASDAQ:AFCG) and Orchid Island Capital (NYSE:ORC) are both small-cap finance companies, but which is the superior stock? We will compare the two companies based on the strength of their profitability, risk, valuation, dividends, analyst recommendations, earnings and institutional ownership.

Risk & Volatility

AFC Gamma has a beta of 1.03, meaning that its stock price is 3% more volatile than the S&P 500. Comparatively, Orchid Island Capital has a beta of 1.66, meaning that its stock price is 66% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for AFC Gamma and Orchid Island Capital, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
AFC Gamma	1	4	0	0	1.80
Orchid Island Capital	1	3	0	0	1.75

AFC Gamma presently has a consensus price target of $5.75, suggesting a potential upside of 106.09%. Orchid Island Capital has a consensus price target of $7.50, suggesting a potential upside of 2.95%. Given AFC Gamma’s stronger consensus rating and higher possible upside, equities research analysts plainly believe AFC Gamma is more favorable than Orchid Island Capital.

Valuation & Earnings

This table compares AFC Gamma and Orchid Island Capital”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
AFC Gamma	$51.99 million	1.21	$16.78 million	($1.04)	-2.68
Orchid Island Capital	$241.58 million	5.40	$37.66 million	$0.49	14.87

Orchid Island Capital has higher revenue and earnings than AFC Gamma. AFC Gamma is trading at a lower price-to-earnings ratio than Orchid Island Capital, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares AFC Gamma and Orchid Island Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
AFC Gamma	-70.46%	8.45%	4.90%
Orchid Island Capital	N/A	6.69%	0.79%

Dividends

AFC Gamma pays an annual dividend of $0.60 per share and has a dividend yield of 21.5%. Orchid Island Capital pays an annual dividend of $1.44 per share and has a dividend yield of 19.8%. AFC Gamma pays out -57.7% of its earnings in the form of a dividend. Orchid Island Capital pays out 293.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Orchid Island Capital has increased its dividend for 1 consecutive years. AFC Gamma is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider & Institutional Ownership

26.5% of AFC Gamma shares are owned by institutional investors. Comparatively, 32.7% of Orchid Island Capital shares are owned by institutional investors. 25.1% of AFC Gamma shares are owned by company insiders. Comparatively, 0.4% of Orchid Island Capital shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Summary

Orchid Island Capital beats AFC Gamma on 9 of the 16 factors compared between the two stocks.

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.

About Orchid Island Capital

Orchid Island Capital, Inc., a specialty finance company, invests in residential mortgage-backed securities (RMBS) in the United States. The company’s RMBS is backed by single-family residential mortgage loans, referred as Agency RMBS. Its portfolio includes traditional pass-through Agency RMBS, such as mortgage pass through certificates and collateralized mortgage obligations; and structured Agency RMBS comprising interest only securities, inverse interest only securities, and principal only securities. The company has elected to be taxed as a real estate investment trust (REIT) for the United States federal income tax purposes. As a result, it would not be subject to corporate income tax on that portion of its net income that is distributed to stockholders, if it annually distributes dividends equal to at least 90% of its REIT taxable income to its stockholders. Orchid Island Capital, Inc. was incorporated in 2010 and is headquartered in Vero Beach, Florida.