Ladder Capital (NYSE: LADR) and Ares Commercial Real Estate (NYSE:ACRE) are both small-cap financials companies, but which is the superior investment? We will contrast the two companies based on the strength of their valuation, profitability, risk, institutional ownership, earnings, dividends and analyst recommendations.
Ladder Capital pays an annual dividend of $1.26 per share and has a dividend yield of 8.4%. Ares Commercial Real Estate pays an annual dividend of $1.08 per share and has a dividend yield of 8.6%. Ladder Capital pays out 105.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ares Commercial Real Estate pays out 100.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Ares Commercial Real Estate has raised its dividend for 2 consecutive years. Ares Commercial Real Estate is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
This table compares Ladder Capital and Ares Commercial Real Estate’s top-line revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Ladder Capital||$450.14 million||3.73||$95.27 million||$1.20||12.56|
|Ares Commercial Real Estate||$97.54 million||3.69||$30.40 million||$1.08||11.65|
Ladder Capital has higher revenue and earnings than Ares Commercial Real Estate. Ares Commercial Real Estate is trading at a lower price-to-earnings ratio than Ladder Capital, indicating that it is currently the more affordable of the two stocks.
This table compares Ladder Capital and Ares Commercial Real Estate’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Ares Commercial Real Estate||31.17%||7.54%||1.96%|
Institutional & Insider Ownership
49.7% of Ladder Capital shares are owned by institutional investors. Comparatively, 63.2% of Ares Commercial Real Estate shares are owned by institutional investors. 12.5% of Ladder Capital shares are owned by company insiders. Comparatively, 1.8% of Ares Commercial Real Estate shares are owned by company 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 and target prices for Ladder Capital and Ares Commercial Real Estate, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Ares Commercial Real Estate||0||2||2||0||2.50|
Ladder Capital presently has a consensus target price of $16.50, suggesting a potential upside of 9.49%. Ares Commercial Real Estate has a consensus target price of $14.17, suggesting a potential upside of 12.61%. Given Ares Commercial Real Estate’s higher probable upside, analysts clearly believe Ares Commercial Real Estate is more favorable than Ladder Capital.
Volatility and Risk
Ladder Capital has a beta of 0.96, suggesting that its share price is 4% less volatile than the S&P 500. Comparatively, Ares Commercial Real Estate has a beta of 0.62, suggesting that its share price is 38% less volatile than the S&P 500.
Ladder Capital beats Ares Commercial Real Estate on 11 of the 17 factors compared between the two stocks.
About Ladder Capital
Ladder Capital Corp is a commercial real estate finance company. The Company’s segments include loans, securities, real estate and corporate/other. The loans segment includes mortgage loan receivables held for investment (balance sheet loans) and mortgage loan receivables held for sale (conduit loans). The securities segment consists of all of its activities related to commercial real estate securities, which include investments in commercial mortgage-backed securities (CMBS) and United States Agency Securities. The real estate segment includes net leased properties, office buildings, a warehouse and condominium units. The Corporate/other segment includes the Company’s investments in joint ventures, other asset management activities and operating expenses. The Company invests primarily in loans, securities and other interests in the United States commercial real estate, with a focus on senior secured assets.
About Ares Commercial Real Estate
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.
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