Analyzing Investors Real Estate Trust (IRET) & iStar Financial (STAR)

Investors Real Estate Trust (NYSE: IRET) and iStar Financial (NYSE:STAR) are both small-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their analyst recommendations, earnings, institutional ownership, dividends, profitability, risk and valuation.

Volatility & Risk

Investors Real Estate Trust has a beta of 0.8, suggesting that its stock price is 20% less volatile than the S&P 500. Comparatively, iStar Financial has a beta of 1.29, suggesting that its stock price is 29% more volatile than the S&P 500.

Profitability

This table compares Investors Real Estate Trust and iStar Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Investors Real Estate Trust 25.72% 0.11% 0.03%
iStar Financial 24.13% 19.57% 3.97%

Dividends

Investors Real Estate Trust pays an annual dividend of $0.28 per share and has a dividend yield of 4.8%. iStar Financial does not pay a dividend. Investors Real Estate Trust pays out 80.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Insider and Institutional Ownership

53.1% of Investors Real Estate Trust shares are owned by institutional investors. Comparatively, 88.9% of iStar Financial shares are owned by institutional investors. 1.0% of Investors Real Estate Trust shares are owned by company insiders. Comparatively, 4.4% of iStar Financial shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Analyst Ratings

This is a summary of current recommendations for Investors Real Estate Trust and iStar Financial, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Investors Real Estate Trust 0 1 0 0 2.00
iStar Financial 0 2 0 0 2.00

Investors Real Estate Trust presently has a consensus target price of $6.50, indicating a potential upside of 12.07%. iStar Financial has a consensus target price of $14.00, indicating a potential upside of 25.34%. Given iStar Financial’s higher possible upside, analysts clearly believe iStar Financial is more favorable than Investors Real Estate Trust.

Earnings & Valuation

This table compares Investors Real Estate Trust and iStar Financial’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Investors Real Estate Trust $205.74 million 3.40 $43.34 million $0.35 16.57
iStar Financial $477.03 million 1.60 $95.30 million ($0.53) -21.08

iStar Financial has higher revenue and earnings than Investors Real Estate Trust. iStar Financial is trading at a lower price-to-earnings ratio than Investors Real Estate Trust, indicating that it is currently the more affordable of the two stocks.

Summary

iStar Financial beats Investors Real Estate Trust on 9 of the 14 factors compared between the two stocks.

About Investors Real Estate Trust

Investors Real Estate Trust is a self-advised equity real estate investment trust (REIT). The Company’s business consists of owning and operating income-producing real estate properties. Its segments include Multifamily, Healthcare and All Other. Its investments consist of multifamily and healthcare properties located primarily in the upper Midwest states of Minnesota and North Dakota. It conducts its business operations through its operating partnership, IRET Properties, which is principally engaged in acquiring, owning, operating and leasing real estate. It invests in multifamily properties and commercial properties that are leased to single or multiple tenants, usually for approximately five years or longer. As of May 26, 2017, the Company held for investment 86 multifamily properties containing 12,813 apartment units and 44 commercial properties, consisting of healthcare, industrial, office and retail, containing approximately 2.7 million square feet of leasable space.

About iStar Financial

iStar Inc. finances, invests in and develops real estate and real estate related projects as part of its integrated investment platform. The Company’s four business segments are Real Estate Finance, Net Lease, Operating Properties, and Land and Development. The Real Estate Finance portfolio consists of senior and mezzanine real estate loans that may be either fixed-rate or variable-rate. The Net Lease portfolio consists of properties owned by the Company and leased to single tenants, where the properties are subject to long-term leases. The Operating Properties portfolio consists of commercial and residential properties, which represent a pool of assets across a range of geographies and property types. The Land and Development portfolio consists of land entitled for master planned communities, as well as waterfront and urban infill land parcels located throughout the United States. Its Land and Development projects include Great Oaks, Sage Scottsdale, Naples Reserve and Coney Island.

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