Sotherly Hotels (NASDAQ: SOHO) and Sunstone Hotel Investors (NYSE:SHO) are both finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, risk, valuation, dividends, institutional ownership, profitability and analyst recommendations.

Profitability

This table compares Sotherly Hotels and Sunstone Hotel Investors’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Sotherly Hotels 1.59% 3.02% 0.60%
Sunstone Hotel Investors 15.41% 7.70% 4.91%

Institutional and Insider Ownership

26.5% of Sotherly Hotels shares are owned by institutional investors. 13.8% of Sotherly Hotels shares are owned by company insiders. Comparatively, 0.8% of Sunstone Hotel Investors shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Valuation & Earnings

This table compares Sotherly Hotels and Sunstone Hotel Investors’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Sotherly Hotels $152.55 million 0.54 $34.37 million ($0.01) -595.40
Sunstone Hotel Investors $1.19 billion 3.16 $344.05 million $0.78 21.38

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

Analyst Recommendations

This is a summary of recent ratings and target prices for Sotherly Hotels and Sunstone Hotel Investors, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sotherly Hotels 0 1 1 0 2.50
Sunstone Hotel Investors 2 5 2 0 2.00

Sotherly Hotels presently has a consensus price target of $8.00, indicating a potential upside of 34.23%. Sunstone Hotel Investors has a consensus price target of $16.13, indicating a potential downside of 3.33%. Given Sotherly Hotels’ stronger consensus rating and higher probable upside, equities analysts plainly believe Sotherly Hotels is more favorable than Sunstone Hotel Investors.

Dividends

Sotherly Hotels pays an annual dividend of $0.44 per share and has a dividend yield of 7.4%. Sunstone Hotel Investors pays an annual dividend of $0.20 per share and has a dividend yield of 1.2%. Sotherly Hotels pays out -4,395.6% of its earnings in the form of a dividend. Sunstone Hotel Investors pays out 25.6% 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 is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility and Risk

Sotherly Hotels has a beta of 0.78, indicating that its share price is 22% less volatile than the S&P 500. Comparatively, Sunstone Hotel Investors has a beta of 1.17, indicating that its share price is 17% more volatile than the S&P 500.

Summary

Sunstone Hotel Investors beats Sotherly Hotels on 10 of the 16 factors compared between the two stocks.

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.

Sunstone Hotel Investors Company Profile

Sunstone Hotel Investors, Inc. operates as a self-managed and self-administered real estate investment trust. The Company’s primary business is to acquire, own, asset manage and renovate primarily urban and resort upper upscale hotels in the United States. It operates through hotel ownership segment. It owns primarily urban and resort upper upscale hotels in the United States. The Company‚Äôs hotels are operated under nationally recognized brands, such as Marriott, Hilton and Hyatt. As of July 26, 2017 the Company has interest in 27 hotels, including 13,202 rooms. The Company’s hotels are located in gateway markets, such as Boston, New York, Washington, District of Columbia (DC)/Baltimore, Chicago, Orlando, New Orleans, San Francisco, Los Angeles, Orange County and San Diego.

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