Reviewing AFC Gamma (NASDAQ:AFCG) and MFA Financial (NYSE:MFA)

MFA Financial (NYSE:MFA) and AFC Gamma (NASDAQ:AFCG) are both small-cap finance companies, but which is the better business? We will contrast the two companies based on the strength of their profitability, dividends, analyst recommendations, institutional ownership, valuation, risk and earnings.

Risk & Volatility

MFA Financial has a beta of 1.47, indicating that its share price is 47% more volatile than the S&P 500. Comparatively, AFC Gamma has a beta of 0.77, indicating that its share price is 23% less volatile than the S&P 500.

Profitability

This table compares MFA Financial and AFC Gamma’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
MFA Financial	17.80%	6.86%	0.99%
AFC Gamma	-43.21%	1.48%	0.85%

Institutional and Insider Ownership

65.3% of MFA Financial shares are owned by institutional investors. Comparatively, 26.5% of AFC Gamma shares are owned by institutional investors. 1.0% of MFA Financial shares are owned by insiders. Comparatively, 30.7% of AFC Gamma shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Valuation & Earnings

This table compares MFA Financial and AFC Gamma”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
MFA Financial	$745.06 million	1.27	$176.78 million	$0.87	10.71
AFC Gamma	$21.97 million	3.28	-$20.67 million	($0.64)	-4.78

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

Analyst Recommendations

This is a summary of recent recommendations for MFA Financial and AFC Gamma, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
MFA Financial	0	4	3	0	2.43
AFC Gamma	1	2	0	0	1.67

MFA Financial currently has a consensus target price of $10.69, suggesting a potential upside of 14.73%. AFC Gamma has a consensus target price of $4.50, suggesting a potential upside of 47.06%. Given AFC Gamma’s higher possible upside, analysts plainly believe AFC Gamma is more favorable than MFA Financial.

Dividends

MFA Financial pays an annual dividend of $1.44 per share and has a dividend yield of 15.5%. AFC Gamma pays an annual dividend of $0.20 per share and has a dividend yield of 6.5%. MFA Financial pays out 165.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. AFC Gamma pays out -31.3% of its earnings in the form of a dividend. MFA Financial has increased its dividend for 1 consecutive years. MFA Financial is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

MFA Financial beats AFC Gamma on 13 of the 17 factors compared between the two stocks.

About MFA Financial

MFA Financial, Inc., together with its subsidiaries, operates as a real estate investment trust in the United States. It invests in residential mortgage securities, including non-agency mortgage-backed securities, agency MBS, and credit risk transfer securities; residential whole loans, including purchased performing loans, purchased credit deteriorated, and non-performing loans; and mortgage servicing rights related assets. The company was incorporated in 1997 and is based in New York, New York.

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.