Forestar Group (NYSE: FOR) and Ellington Financial (NYSE:EFC) are both small-cap finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their analyst recommendations, risk, profitability, dividends, earnings, valuation and institutional ownership.
Volatility & Risk
Forestar Group has a beta of 1.8, indicating that its share price is 80% more volatile than the S&P 500. Comparatively, Ellington Financial has a beta of 0.3, indicating that its share price is 70% less volatile than the S&P 500.
This table compares Forestar Group and Ellington Financial’s revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Forestar Group | $114.32 million | 8.58 | $50.25 million | N/A | N/A |
| Ellington Financial | $93.96 million | 5.10 | $33.98 million | $1.08 | 14.69 |
Forestar Group has higher revenue and earnings than Ellington Financial.
Analyst Ratings
This is a summary of recent ratings and target prices for Forestar Group and Ellington Financial, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Forestar Group | 0 | 0 | 0 | 0 | N/A |
| Ellington Financial | 0 | 2 | 3 | 0 | 2.60 |
Ellington Financial has a consensus target price of $17.20, indicating a potential upside of 8.38%. Given Ellington Financial’s higher possible upside, analysts plainly believe Ellington Financial is more favorable than Forestar Group.
Dividends
Ellington Financial pays an annual dividend of $1.64 per share and has a dividend yield of 10.3%. Forestar Group does not pay a dividend. Ellington Financial pays out 151.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.
Insider & Institutional Ownership
22.5% of Forestar Group shares are held by institutional investors. Comparatively, 46.0% of Ellington Financial shares are held by institutional investors. 0.1% of Forestar Group shares are held by insiders. Comparatively, 11.1% of Ellington Financial shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.
Profitability
This table compares Forestar Group and Ellington Financial’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Forestar Group | 25.80% | -2.30% | -1.80% |
| Ellington Financial | 40.17% | 5.39% | 1.15% |
Summary
Ellington Financial beats Forestar Group on 8 of the 14 factors compared between the two stocks.
About Forestar Group
Forestar Group Inc. operates as a real estate development company. The company engages in the acquisition, entitlement, development, and sale of real estate, primarily single-family residential and mixed-use communities. It also sells residential lots to home builders; and commercial properties. As of December 31, 2017, Forestar Group Inc. had 49 entitled, developed, or under development projects in 11 states and 16 markets planned for residential and commercial uses in the United States. The company is headquartered in Austin, Texas. Forestar Group Inc. is a subsidiary of D.R. Horton, Inc.
About Ellington Financial
Ellington Financial LLC, through its subsidiary Ellington Financial Operating Partnership LLC, operates as a specialty finance company in the United States. The company acquires and manages mortgage-related assets, including residential mortgage-backed securities (RMBS) backed by prime jumbo, Alt-A, manufactured housing, and subprime residential mortgage loans; RMBS for which the principal and interest payments are guaranteed by the U.S. government agency or the U.S. government-sponsored entity; residential mortgage loans; commercial mortgage-backed securities; commercial mortgage loans and other commercial real estate debt; and residential mortgage loans. It also provides collateralized loan obligations; mortgage-related and non-mortgage-related derivatives; equity investments in mortgage-related entities; and other strategic investments, as well as invests in corporate debt and equity securities. In addition, it offers consumer loans and asset-backed securities backed by consumer and commercial assets. Ellington Financial LLC was founded in 2007 and is based in Old Greenwich, Connecticut.
