Community Healthcare Trust (NYSE: CHCT) and MedEquities Realty Trust (NYSE:MRT) are both small-cap finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their earnings, valuation, risk, institutional ownership, profitability, analyst recommendations and dividends.

Profitability

This table compares Community Healthcare Trust and MedEquities Realty Trust’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Community Healthcare Trust 11.30% 1.81% 1.33%
MedEquities Realty Trust 32.68% 5.58% 3.52%

Dividends

Community Healthcare Trust pays an annual dividend of $1.56 per share and has a dividend yield of 6.4%. MedEquities Realty Trust pays an annual dividend of $0.84 per share and has a dividend yield of 7.4%. Community Healthcare Trust pays out 577.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. MedEquities Realty Trust pays out 240.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. MedEquities Realty Trust is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings and Valuation

This table compares Community Healthcare Trust and MedEquities Realty Trust’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Community Healthcare Trust $30.77 million 10.13 $20.43 million $0.27 90.97
MedEquities Realty Trust $56.96 million 6.34 $46.67 million $0.35 32.51

MedEquities Realty Trust has higher revenue and earnings than Community Healthcare Trust. MedEquities Realty Trust is trading at a lower price-to-earnings ratio than Community Healthcare Trust, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of current ratings for Community Healthcare Trust and MedEquities Realty Trust, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Community Healthcare Trust 0 0 1 0 3.00
MedEquities Realty Trust 1 1 5 0 2.57

Community Healthcare Trust presently has a consensus target price of $26.50, indicating a potential upside of 7.90%. MedEquities Realty Trust has a consensus target price of $12.86, indicating a potential upside of 12.98%. Given MedEquities Realty Trust’s higher possible upside, analysts clearly believe MedEquities Realty Trust is more favorable than Community Healthcare Trust.

Insider and Institutional Ownership

59.0% of Community Healthcare Trust shares are owned by institutional investors. Comparatively, 97.6% of MedEquities Realty Trust shares are owned by institutional investors. 5.5% of Community Healthcare Trust shares are owned by insiders. Comparatively, 2.5% of MedEquities Realty Trust shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Summary

MedEquities Realty Trust beats Community Healthcare Trust on 11 of the 15 factors compared between the two stocks.

About Community Healthcare Trust

Community Healthcare Trust Incorporated is an integrated healthcare real estate company. The Company owns and acquires, or finances, real estate properties that are leased to hospitals, doctors, healthcare systems or other healthcare service providers in non-urban markets. It has investments in healthcare real estate, including mortgage and other loans. The Company’s medical office buildings are located in areas, such as, Florida, Georgia, Illinois, Kentucky, Ohio and Texas. Its physician clinics are located in Alabama, Florida, Kansas, Pennsylvania and Wisconsin. Its surgical centers and hospitals are located in areas, such as Louisiana, Michigan and Arizona. Its behavioral facilities are located in Indiana and Illinois. Its specialty centers are located in Texas, Colorado and Alabama, among others. As of December 31, 2016, the Company had interests in 57 real estate properties and one mortgage note, located in 22 states, totaling over 1.33 million square feet in the aggregate.

About MedEquities Realty Trust

MedEquities Realty Trust, Inc. is a real estate investment trust (REIT). The Company invests in a diversified mix of healthcare properties and healthcare-related real estate debt investments. The Company invests primarily in real estate across the acute and post-acute spectrum of care. It focuses on investing in various types of healthcare properties, including acute care hospitals; skilled nursing facilities; short-stay surgical and specialty hospitals, which focus on orthopedic, heart and other dedicated surgeries and specialty procedures; dedicated specialty hospitals, such as inpatient rehabilitation facilities, long-term acute care hospitals and facilities providing psychiatric care; physician clinics; diagnostic facilities; outpatient surgery centers, and facilities that support these services, such as medical office buildings. As of September 30, 2016, the Company’s portfolio included 24 healthcare facilities and one healthcare-related debt investment.

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