Ellington Credit (NYSE:EARN) versus Hennessy Advisors (NASDAQ:HNNA) Financial Comparison

Ellington Credit (NYSE:EARN) and Hennessy Advisors (NASDAQ:HNNA) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their analyst recommendations, institutional ownership, profitability, risk, dividends, valuation and earnings.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Ellington Credit and Hennessy Advisors, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ellington Credit	0	0	1	0	3.00
Hennessy Advisors	0	1	0	0	2.00

Ellington Credit currently has a consensus target price of $5.25, indicating a potential upside of 50.43%. Given Ellington Credit’s stronger consensus rating and higher probable upside, analysts plainly believe Ellington Credit is more favorable than Hennessy Advisors.

Dividends

Ellington Credit pays an annual dividend of $0.96 per share and has a dividend yield of 27.5%. Hennessy Advisors pays an annual dividend of $0.60 per share and has a dividend yield of 5.9%. Ellington Credit pays out -98.0% of its earnings in the form of a dividend. Hennessy Advisors pays out 57.7% 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. Ellington Credit is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional and Insider Ownership

20.4% of Ellington Credit shares are owned by institutional investors. Comparatively, 10.3% of Hennessy Advisors shares are owned by institutional investors. 1.4% of Ellington Credit shares are owned by insiders. Comparatively, 36.0% of Hennessy Advisors shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

This table compares Ellington Credit and Hennessy Advisors’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ellington Credit	-70.52%	N/A	N/A
Hennessy Advisors	24.77%	8.31%	5.48%

Volatility and Risk

Ellington Credit has a beta of 1.32, indicating that its stock price is 32% more volatile than the S&P 500. Comparatively, Hennessy Advisors has a beta of 0.56, indicating that its stock price is 44% less volatile than the S&P 500.

Earnings & Valuation

This table compares Ellington Credit and Hennessy Advisors”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ellington Credit	$51.80 million	2.57	-$38.85 million	($0.98)	-3.56
Hennessy Advisors	$35.54 million	2.28	$9.96 million	$1.04	9.86

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

Summary

Ellington Credit beats Hennessy Advisors on 9 of the 16 factors compared between the two stocks.

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.

About Hennessy Advisors

Hennessy Advisors, Inc. is an employee owned investment manager. It provides its services to Hennessy Funds and investment companies. The firm launches and manages equity, fixed income, and balanced mutual funds. It invests in the public equity and fixed income markets across the globe. The firm primarily invests in growth stocks of companies. It conducts in-house research to make its investments. Hennessy Advisors, Inc. was founded in 1989 and is based in Novato, California with additional offices in Boston, Massachusetts and Chapel Hill, North Carolina.