Financial Review: Ellington Credit (NYSE:EARN) and TPG (NASDAQ:TPG)

TPG (NASDAQ:TPG) and Ellington Credit (NYSE:EARN) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their analyst recommendations, risk, valuation, dividends, earnings, profitability and institutional ownership.

Profitability

This table compares TPG and Ellington Credit’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
TPG	4.67%	28.10%	8.03%
Ellington Credit	-70.52%	N/A	N/A

Valuation and Earnings

This table compares TPG and Ellington Credit”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
TPG	$4.67 billion	3.92	$184.59 million	$0.66	72.26
Ellington Credit	$51.80 million	3.19	-$38.85 million	($0.98)	-4.41

TPG has higher revenue and earnings than Ellington Credit. Ellington Credit is trading at a lower price-to-earnings ratio than TPG, indicating that it is currently the more affordable of the two stocks.

Dividends

TPG pays an annual dividend of $2.36 per share and has a dividend yield of 4.9%. Ellington Credit pays an annual dividend of $0.96 per share and has a dividend yield of 22.2%. TPG pays out 357.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ellington Credit pays out -98.0% of its earnings in the form of a dividend. Ellington Credit is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for TPG and Ellington Credit, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
TPG	0	4	13	0	2.76
Ellington Credit	0	1	1	0	2.50

TPG presently has a consensus price target of $63.33, suggesting a potential upside of 32.80%. Ellington Credit has a consensus price target of $5.50, suggesting a potential upside of 27.17%. Given TPG’s stronger consensus rating and higher possible upside, equities analysts clearly believe TPG is more favorable than Ellington Credit.

Volatility and Risk

TPG has a beta of 1.47, suggesting that its share price is 47% more volatile than the S&P 500. Comparatively, Ellington Credit has a beta of 1.28, suggesting that its share price is 28% more volatile than the S&P 500.

Institutional & Insider Ownership

94.0% of TPG shares are owned by institutional investors. Comparatively, 20.4% of Ellington Credit shares are owned by institutional investors. 61.4% of TPG shares are owned by insiders. Comparatively, 1.4% of Ellington Credit shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Summary

TPG beats Ellington Credit on 14 of the 16 factors compared between the two stocks.

About TPG

TPG Inc. operates as an alternative asset manager in the United States and internationally. The company offers investment management services to TPG Funds, limited partners, and other vehicles. It also offers monitoring services to portfolio companies; advisory, debt and equity arrangement, and underwriting and placement services; and capital structuring and other advisory services to portfolio companies. In addition, the company invests in private equity funds, real estate funds, hedge funds, and credit funds. TPG Inc. was founded in 1992 and is based in Fort Worth, Texas. The company operates as a subsidiary of TPG GP A, LLC.

About Ellington Credit

Ellington Credit Company, a real estate investment trust, acquires, invests in, and manages residential mortgage-and real estate-related assets. It acquires and manages residential mortgage-backed securities (RMBS), including agency pools and agency collateralized mortgage obligations (CMOs); and non-agency RMBS, such as non-agency CMOs, such as investment grade and non-investment grade. 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. The company was formerly known as Ellington Residential Mortgage REIT and changed its name to Ellington Credit Company in April 2024. Ellington Credit Company was incorporated in 2012 and is based in Old Greenwich, Connecticut.