Financial Survey: Essent Group (NYSE:ESNT) and Federal Agricultural Mortgage (NYSE:AGM)

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

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%

Volatility and Risk

Federal Agricultural Mortgage has a beta of 0.98, meaning that its share price is 2% less volatile than the S&P 500. Comparatively, Essent Group has a beta of 0.76, meaning that its share price is 24% less volatile than the S&P 500.

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 raised its dividend for 14 consecutive years and Essent Group has raised 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.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Federal Agricultural Mortgage and Essent Group, as reported by MarketBeat.

	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 price target of $255.00, suggesting a potential upside of 14.97%. Essent Group has a consensus price target of $71.86, suggesting a potential upside of 5.52%. Given Federal Agricultural Mortgage’s stronger consensus rating and higher possible upside, research analysts plainly believe Federal Agricultural Mortgage is more favorable than Essent Group.

Earnings & Valuation

This table compares Federal Agricultural Mortgage and Essent Group”s revenue, earnings per share 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.

Insider and Institutional Ownership

68.0% of Federal Agricultural Mortgage shares are held by institutional investors. Comparatively, 93.0% of Essent Group shares are held by institutional investors. 1.9% of Federal Agricultural Mortgage shares are held by insiders. Comparatively, 3.6% of Essent Group shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

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.