Federal Agricultural Mortgage (AGM) and Federal National Mortgage Association (FNMA) Critical Analysis

Federal Agricultural Mortgage (NYSE:AGM) and Federal National Mortgage Association (OTCMKTS:FNMA) are both small-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their analyst recommendations, valuation, profitability, risk, dividends, earnings and institutional ownership.

Risk & Volatility

Federal Agricultural Mortgage has a beta of 1.14, meaning that its share price is 14% more volatile than the S&P 500. Comparatively, Federal National Mortgage Association has a beta of 2.05, meaning that its share price is 105% more volatile than the S&P 500.

Valuation & Earnings

This table compares Federal Agricultural Mortgage and Federal National Mortgage Association’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Federal Agricultural Mortgage $418.04 million 1.83 $84.48 million N/A N/A
Federal National Mortgage Association $112.39 billion 0.01 $2.46 billion N/A N/A

Federal National Mortgage Association has higher revenue and earnings than Federal Agricultural Mortgage.

Dividends

Federal Agricultural Mortgage pays an annual dividend of $2.32 per share and has a dividend yield of 3.2%. Federal National Mortgage Association does not pay a dividend. Federal Agricultural Mortgage has increased its dividend for 6 consecutive years.

Institutional & Insider Ownership

64.2% of Federal Agricultural Mortgage shares are held by institutional investors. Comparatively, 0.2% of Federal National Mortgage Association shares are held by institutional investors. 2.5% of Federal Agricultural Mortgage shares are held by company insiders. Comparatively, 1.0% of Federal National Mortgage Association shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Profitability

This table compares Federal Agricultural Mortgage and Federal National Mortgage Association’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Federal Agricultural Mortgage 20.06% 15.02% 0.47%
Federal National Mortgage Association 14.26% -19.66% 0.79%

Analyst Ratings

This is a summary of current ratings and price targets for Federal Agricultural Mortgage and Federal National Mortgage Association, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Federal Agricultural Mortgage 0 1 1 0 2.50
Federal National Mortgage Association 1 0 0 0 1.00

Federal Agricultural Mortgage presently has a consensus target price of $93.50, indicating a potential upside of 30.22%. Given Federal Agricultural Mortgage’s stronger consensus rating and higher possible upside, analysts plainly believe Federal Agricultural Mortgage is more favorable than Federal National Mortgage Association.

Summary

Federal Agricultural Mortgage beats Federal National Mortgage Association on 11 of the 15 factors compared between the two stocks.

Federal Agricultural Mortgage Company Profile

Federal Agricultural Mortgage Corporation provides a secondary market for various loans made to borrowers in the United States. It operates through four segments: Farm & Ranch, USDA Guarantees, Rural Utilities, and Institutional Credit. The Farm & Ranch segment purchases and retains eligible mortgage loans that are secured by first liens on agricultural real estate; securitizes eligible mortgage loans, and guarantees the timely payment of principal and interest on securities representing interests in or obligations secured by pools of mortgage loans; and issues long-term standby purchase commitments on designated eligible mortgage loans. The USDA Guarantees segment purchases portions of certain agricultural, rural development, business and industry, and community facilities loans guaranteed by the United States Department of Agriculture (USDA). The Rural Utilities segment purchases and guarantees securities that are backed by eligible rural electric and telephone loans. The Institutional Credit segment engages in purchasing and guaranteeing general obligations of institutions that are secured by types of loans eligible under the Farm & Ranch, USDA Guarantees, or Rural Utilities lines of business. Federal Agricultural Mortgage Corporation was founded in 1987 and is headquartered in Washington, District of Columbia.

Federal National Mortgage Association Company Profile

Federal National Mortgage Association provides liquidity and stability support services for the mortgage market in the United States. It securitizes mortgage loans originated by lenders into Fannie Mae mortgage-backed securities (Fannie Mae MBS). The company operates through two segments, Single-Family and Multifamily. The Single-Family segment securitizes and purchases single-family fixed-rate or adjustable-rate, first-lien mortgage loans, or mortgage-related securities backed by these loans; and loans that are insured by Federal Housing Administration, loans guaranteed by the Department of Veterans Affairs and Rural Development Housing and Community Facilities Program of the U.S. Department of Agriculture, manufactured housing loans, and other mortgage-related securities. This segment also provides early funding, MBS trading, and single-family mortgage services. The Multifamily segment securitizes multifamily mortgage loans into Fannie Mae MBS; purchases multifamily mortgage loans; and provides credit enhancement for bonds issued by state and local housing finance authorities to finance multifamily housing. This segment also offers delegated underwriting and servicing, and multifamily mortgage servicing services. The company serves mortgage banking companies, savings and loan associations, savings banks, commercial banks, credit unions, community banks, specialty servicers, insurance companies, and state and local housing finance agencies. Federal National Mortgage Association was founded in 1938 and is based in Washington, the District of Columbia.

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