Hersha Hospitality Trust (NYSE: HT) and Sotherly Hotels (NASDAQ:SOHO) are both small-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their earnings, analyst recommendations, dividends, risk, institutional ownership, profitability and valuation.

Risk and Volatility

Hersha Hospitality Trust has a beta of 1.39, indicating that its share price is 39% more volatile than the S&P 500. Comparatively, Sotherly Hotels has a beta of 0.78, indicating that its share price is 22% less volatile than the S&P 500.

Institutional & Insider Ownership

98.4% of Hersha Hospitality Trust shares are held by institutional investors. Comparatively, 26.5% of Sotherly Hotels shares are held by institutional investors. 8.1% of Hersha Hospitality Trust shares are held by company insiders. Comparatively, 13.8% of Sotherly Hotels shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Analyst Ratings

This is a summary of current recommendations for Hersha Hospitality Trust and Sotherly Hotels, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Hersha Hospitality Trust 1 4 4 0 2.33
Sotherly Hotels 0 1 1 0 2.50

Hersha Hospitality Trust presently has a consensus price target of $19.89, indicating a potential upside of 6.07%. Sotherly Hotels has a consensus price target of $8.00, indicating a potential upside of 35.36%. Given Sotherly Hotels’ stronger consensus rating and higher possible upside, analysts plainly believe Sotherly Hotels is more favorable than Hersha Hospitality Trust.

Profitability

This table compares Hersha Hospitality Trust and Sotherly Hotels’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Hersha Hospitality Trust 22.77% 14.78% 6.13%
Sotherly Hotels 1.59% 3.02% 0.60%

Valuation and Earnings

This table compares Hersha Hospitality Trust and Sotherly Hotels’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Hersha Hospitality Trust $471.75 million 1.66 $138.69 million $2.30 8.15
Sotherly Hotels $152.55 million 0.54 $34.37 million ($0.01) -590.41

Hersha Hospitality Trust has higher revenue and earnings than Sotherly Hotels. Sotherly Hotels is trading at a lower price-to-earnings ratio than Hersha Hospitality Trust, indicating that it is currently the more affordable of the two stocks.

Dividends

Hersha Hospitality Trust pays an annual dividend of $1.12 per share and has a dividend yield of 6.0%. Sotherly Hotels pays an annual dividend of $0.44 per share and has a dividend yield of 7.4%. Hersha Hospitality Trust pays out 48.7% of its earnings in the form of a dividend. Sotherly Hotels pays out -4,395.6% 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. Sotherly Hotels has increased its dividend for 3 consecutive years. Sotherly Hotels is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Hersha Hospitality Trust beats Sotherly Hotels on 10 of the 16 factors compared between the two stocks.

Hersha Hospitality Trust Company Profile

Hersha Hospitality Trust is a self-advised real estate investment trust (REIT). The Company invests primarily in institutional grade hotels in urban gateway markets, including New York, Washington, District of Columbia, Boston, Philadelphia, South Florida and select markets on the West Coast. As of July 20, 2017, the Company’s hotels included 51 hotels totaling 7,804 rooms located in New York, Washington, DC, Boston, Philadelphia, South Florida and select markets on the West Coast. The Company’s property brands include Marriott International, Hilton Hotels, Hyatt Hotels, Intercontinental Hotel Group, Wyndham Hotels and Hersha’s Independent Hotel Collection.

Sotherly Hotels Company Profile

Sotherly Hotels Inc. is a self-managed and self-administered lodging real estate investment trust. The Company is focused on the acquisition, renovation, upbranding and repositioning of upscale to upper-upscale full-service hotels in the southern United States. The Company operates through the hotel ownership segment. The Company conducts its operations through Sotherly Hotels LP, its Operating Partnership, of which the Company is the general partner. Its portfolio consists of approximately 10 full-service, mainly upscale and upper-upscale hotels located in over eight states with an aggregate of approximately 3,010 rooms and approximately 160,930 square feet of meeting space. All of these hotels are owned by subsidiaries of the Operating Partnership, approximately 10 operate under the Hilton, Crowne Plaza, DoubleTree and Sheraton brands, one is an independent hotel, and all are managed on a day to day basis by MHI Hotels Services, LLC, which does business as Chesapeake Hospitality.

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