Analyzing Ares Commercial Real Estate (ACRE) and Starwood Property Trust (STWD)
Ares Commercial Real Estate (NYSE: ACRE) and Starwood Property Trust (NYSE:STWD) are both financials companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, valuation, earnings, profitability, risk, analyst recommendations and dividends.
Valuation and Earnings
This table compares Ares Commercial Real Estate and Starwood Property Trust’s revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Ares Commercial Real Estate||$81.96 million||4.23||$40.33 million||$1.13||10.74|
|Starwood Property Trust||$784.67 million||6.58||$365.18 million||$1.66||11.92|
Risk and Volatility
Ares Commercial Real Estate has a beta of 0.62, suggesting that its share price is 38% less volatile than the S&P 500. Comparatively, Starwood Property Trust has a beta of 0.22, suggesting that its share price is 78% less volatile than the S&P 500.
This table compares Ares Commercial Real Estate and Starwood Property Trust’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Ares Commercial Real Estate||33.69%||7.76%||2.16%|
|Starwood Property Trust||52.28%||11.88%||0.79%|
Ares Commercial Real Estate pays an annual dividend of $1.08 per share and has a dividend yield of 8.9%. Starwood Property Trust pays an annual dividend of $1.92 per share and has a dividend yield of 9.7%. Ares Commercial Real Estate pays out 95.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Starwood Property Trust pays out 115.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Starwood Property Trust has increased its dividend for 2 consecutive years. Starwood Property Trust is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Insider and Institutional Ownership
64.4% of Ares Commercial Real Estate shares are held by institutional investors. Comparatively, 67.9% of Starwood Property Trust shares are held by institutional investors. 1.8% of Ares Commercial Real Estate shares are held by insiders. Comparatively, 2.4% of Starwood Property Trust shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.
This is a summary of current ratings for Ares Commercial Real Estate and Starwood Property Trust, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Ares Commercial Real Estate||0||2||2||0||2.50|
|Starwood Property Trust||0||0||2||0||3.00|
Ares Commercial Real Estate currently has a consensus target price of $14.17, suggesting a potential upside of 16.69%. Starwood Property Trust has a consensus target price of $24.00, suggesting a potential upside of 21.33%. Given Starwood Property Trust’s stronger consensus rating and higher possible upside, analysts plainly believe Starwood Property Trust is more favorable than Ares Commercial Real Estate.
Starwood Property Trust beats Ares Commercial Real Estate on 13 of the 16 factors compared between the two stocks.
Ares Commercial Real Estate Company Profile
Ares Commercial Real Estate Corporation is a specialty finance company. The Company is primarily engaged in originating and investing in commercial real estate (CRE) loans and related investments. The Company operates through principal lending segment. Its target investments include senior mortgage loans, subordinated debt, preferred equity, mezzanine loans and other CRE investment opportunities, including commercial mortgage-backed securities. These investments are generally held for investment and are secured, directly or indirectly, by office, multifamily, retail, industrial, lodging, senior-living, self-storage and other commercial real estate properties, or by ownership interests therein. Through the Company’s manager, Ares Commercial Real Estate Management LLC, it has investment professionals located across the United States and Europe who directly source loan opportunities for the Company with owners, operators and sponsors of CRE properties.
Starwood Property Trust Company Profile
Starwood Property Trust, Inc. is a real estate investment trust. The Company operates through three business segments: Real estate lending (the Lending Segment), which engages primarily in originating, acquiring, financing and managing commercial first mortgages, subordinated mortgages, mezzanine loans, preferred equity, commercial mortgage-backed securities (CMBS), residential mortgage-backed securities, and other real estate and real estate-related debt investments; Real estate investing and servicing (the Investing and Servicing Segment), which includes a servicing business in the United States that manages and works out problem assets; an investment business that selectively acquires and manages unrated, investment grade and non-investment grade rated CMBS, and a mortgage loan business, and Real estate property (the Property Segment), which engages primarily in acquiring and managing equity interests in stabilized commercial real estate properties.
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