NexPoint Real Estate Finance (NYSE:NREF – Get Free Report) and Ares Commercial Real Estate (NYSE:ACRE – Get Free Report) are both small-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, analyst recommendations, institutional ownership, risk, profitability, earnings and valuation.
Dividends
NexPoint Real Estate Finance pays an annual dividend of $2.00 per share and has a dividend yield of 14.9%. Ares Commercial Real Estate pays an annual dividend of $0.60 per share and has a dividend yield of 11.9%. NexPoint Real Estate Finance pays out 71.2% of its earnings in the form of a dividend. Ares Commercial Real Estate pays out -176.5% 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.
Profitability
This table compares NexPoint Real Estate Finance and Ares Commercial Real Estate’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| NexPoint Real Estate Finance | 102.28% | 17.94% | 1.14% |
| Ares Commercial Real Estate | -29.57% | -5.44% | -1.78% |
Analyst Recommendations
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| NexPoint Real Estate Finance | 1 | 3 | 0 | 0 | 1.75 |
| Ares Commercial Real Estate | 1 | 5 | 0 | 0 | 1.83 |
NexPoint Real Estate Finance currently has a consensus price target of $14.75, indicating a potential upside of 10.20%. Ares Commercial Real Estate has a consensus price target of $4.83, indicating a potential downside of 4.39%. Given NexPoint Real Estate Finance’s higher possible upside, equities analysts clearly believe NexPoint Real Estate Finance is more favorable than Ares Commercial Real Estate.
Volatility and Risk
NexPoint Real Estate Finance has a beta of 1.26, suggesting that its share price is 26% more volatile than the S&P 500. Comparatively, Ares Commercial Real Estate has a beta of 1.34, suggesting that its share price is 34% more volatile than the S&P 500.
Insider and Institutional Ownership
67.8% of NexPoint Real Estate Finance shares are held by institutional investors. Comparatively, 41.3% of Ares Commercial Real Estate shares are held by institutional investors. 55.7% of NexPoint Real Estate Finance shares are held by company insiders. Comparatively, 1.8% of Ares Commercial Real Estate 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.
Valuation and Earnings
This table compares NexPoint Real Estate Finance and Ares Commercial Real Estate”s revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| NexPoint Real Estate Finance | $72.51 million | 3.27 | $29.19 million | $2.81 | 4.76 |
| Ares Commercial Real Estate | $4.91 million | 56.63 | -$34.99 million | ($0.34) | -14.87 |
NexPoint Real Estate Finance has higher revenue and earnings than Ares Commercial Real Estate. Ares Commercial Real Estate is trading at a lower price-to-earnings ratio than NexPoint Real Estate Finance, indicating that it is currently the more affordable of the two stocks.
Summary
NexPoint Real Estate Finance beats Ares Commercial Real Estate on 11 of the 15 factors compared between the two stocks.
About NexPoint Real Estate Finance
NexPoint Real Estate Finance, Inc. operates as a commercial mortgage real estate investment trust in the United States. It focuses on originating, structuring, and investing in first-lien mortgage loans, mezzanine loans, preferred equity, convertible notes, multifamily properties, and common equity investments, as well as multifamily and single-family rental commercial mortgage-backed securities securitizations, multifamily structured credit risk notes, and mortgage-backed securities or target assets. The company has elected to be taxed as a real estate investment trust (REIT) and would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. NexPoint Real Estate Finance, Inc. was incorporated in 2019 and is based in Dallas, Texas.
About Ares Commercial Real Estate
Ares Commercial Real Estate Corporation, a specialty finance company, originates and invests in commercial real estate (CRE) loans and related investments in the United States. It provides a range of financing solutions for the owners, operators, and sponsors of CRE properties. The company originates senior mortgage loans, subordinate debt and preferred equity products, mezzanine loans, and other CRE investments, including commercial mortgage-backed securities. It has elected and qualified to be taxed as a real estate investment trust for the United States federal income tax purposes under the Internal Revenue Code of 1986. Ares Commercial Real Estate Corporation was incorporated in 2011 and is based in New York, New York.
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