Critical Survey: NexPoint Residential Trust (NXRT) and Altisource Residential (RESI)

Altisource Residential (NYSE: RESI) and NexPoint Residential Trust (NYSE:NXRT) are both small-cap financials companies, but which is the better business? We will contrast the two companies based on the strength of their profitability, institutional ownership, analyst recommendations, risk, dividends, earnings and valuation.

Dividends

Altisource Residential pays an annual dividend of $0.60 per share and has a dividend yield of 5.6%. NexPoint Residential Trust pays an annual dividend of $1.00 per share and has a dividend yield of 4.3%. Altisource Residential pays out -15.4% of its earnings in the form of a dividend. NexPoint Residential Trust pays out 40.3% 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. Altisource Residential has raised its dividend for 4 consecutive years and NexPoint Residential Trust has raised its dividend for 2 consecutive years. Altisource Residential is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Altisource Residential and NexPoint Residential Trust, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Altisource Residential 0 2 5 0 2.71
NexPoint Residential Trust 0 1 4 0 2.80

Altisource Residential presently has a consensus price target of $15.57, suggesting a potential upside of 46.62%. NexPoint Residential Trust has a consensus price target of $27.67, suggesting a potential upside of 18.23%. Given Altisource Residential’s higher probable upside, equities research analysts plainly believe Altisource Residential is more favorable than NexPoint Residential Trust.

Risk and Volatility

Altisource Residential has a beta of 1.74, indicating that its share price is 74% more volatile than the S&P 500. Comparatively, NexPoint Residential Trust has a beta of 0.72, indicating that its share price is 28% less volatile than the S&P 500.

Profitability

This table compares Altisource Residential and NexPoint Residential Trust’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Altisource Residential -266.58% -21.64% -8.15%
NexPoint Residential Trust 37.00% 23.28% 4.96%

Earnings and Valuation

This table compares Altisource Residential and NexPoint Residential Trust’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Altisource Residential $56.76 million 10.00 -$228.02 million ($3.90) -2.72
NexPoint Residential Trust $144.24 million 3.42 $21.88 million $2.48 9.44

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

Insider and Institutional Ownership

70.3% of Altisource Residential shares are owned by institutional investors. Comparatively, 55.7% of NexPoint Residential Trust shares are owned by institutional investors. 0.5% of Altisource Residential shares are owned by company insiders. Comparatively, 19.0% of NexPoint Residential Trust 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.

Summary

NexPoint Residential Trust beats Altisource Residential on 9 of the 17 factors compared between the two stocks.

About Altisource Residential

Altisource Residential Corporation is a real estate investment trust (REIT). The Company focuses on acquiring, owning and managing single-family rental (SFR) properties throughout the United States. The Company conducts its activities through its subsidiary, Altisource Residential, L.P., and its subsidiaries. The Company also converts a portion of the real estate owned (REO) properties that it acquires through resolution of its mortgage loans into SFR properties. The Company has also entered into property management service agreements with two third-party property managers: Altisource Portfolio Solutions, SA (ASPS) and Main Street Renewal, LLC (MSR), to provide, among other things, leasing and lease management, operations, maintenance, repair and property management services in respect of its SFR portfolios. As of December 31, 2016, the Company had 10,533 properties, consisting of 9,939 properties held for use and 594 held for sale.

About NexPoint Residential Trust

NexPoint Residential Trust, Inc. is an externally managed real estate investment trust (REIT). The Company’s investment objectives are to maximize the cash flow and value of properties owned, acquire properties with cash flow growth potential, provide quarterly cash distributions and achieve long-term capital appreciation for its stockholders through targeted management and a value-add program. The Company is focused on multifamily investments primarily located in the Southeastern and Southwestern United States. All of the Company’s business operations are conducted through NexPoint Residential Trust Operating Partnership, L.P. (OP). The sole limited partner of the OP is the Company. Its subsidiary, NexPoint Residential Trust Operating Partnership GP, LLC, is the sole general partner of the OP. As of December 31, 2016, the Company owned 39 properties representing 12,965 units in eight states, including two Parked Assets. The Company’s advisor is NexPoint Real Estate Advisors, L.P.

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