Comparing Two Harbors Investment (NYSE:TWO) & NexPoint Residential Trust (NYSE:NXRT)

NexPoint Residential Trust (NYSE:NXRT) and Two Harbors Investment (NYSE:TWO) are both finance companies, but which is the better stock? We will compare the two businesses based on the strength of their profitability, earnings, analyst recommendations, dividends, risk, institutional ownership and valuation.

Risk & Volatility

NexPoint Residential Trust has a beta of 0.34, meaning that its share price is 66% less volatile than the S&P 500. Comparatively, Two Harbors Investment has a beta of 0.63, meaning that its share price is 37% less volatile than the S&P 500.

Insider & Institutional Ownership

71.9% of NexPoint Residential Trust shares are held by institutional investors. Comparatively, 61.7% of Two Harbors Investment shares are held by institutional investors. 21.5% of NexPoint Residential Trust shares are held by company insiders. Comparatively, 0.9% of Two Harbors Investment shares are held 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.

Valuation and Earnings

This table compares NexPoint Residential Trust and Two Harbors Investment’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
NexPoint Residential Trust $146.60 million 8.38 -$1.60 million $1.88 26.12
Two Harbors Investment $870.03 million 4.74 -$44.29 million $1.97 7.68

NexPoint Residential Trust has higher earnings, but lower revenue than Two Harbors Investment. Two Harbors Investment 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.

Dividends

NexPoint Residential Trust pays an annual dividend of $1.10 per share and has a dividend yield of 2.2%. Two Harbors Investment pays an annual dividend of $1.60 per share and has a dividend yield of 10.6%. NexPoint Residential Trust pays out 58.5% of its earnings in the form of a dividend. Two Harbors Investment pays out 81.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. NexPoint Residential Trust has increased its dividend for 4 consecutive years and Two Harbors Investment has increased its dividend for 3 consecutive years.

Profitability

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

Net Margins Return on Equity Return on Assets
NexPoint Residential Trust 63.01% 33.96% 8.07%
Two Harbors Investment -27.98% 12.56% 1.51%

Analyst Recommendations

This is a breakdown of current recommendations and price targets for NexPoint Residential Trust and Two Harbors Investment, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
NexPoint Residential Trust 0 2 6 0 2.75
Two Harbors Investment 0 1 7 0 2.88

NexPoint Residential Trust currently has a consensus price target of $47.36, suggesting a potential downside of 3.65%. Two Harbors Investment has a consensus price target of $14.65, suggesting a potential downside of 3.04%. Given Two Harbors Investment’s stronger consensus rating and higher probable upside, analysts clearly believe Two Harbors Investment is more favorable than NexPoint Residential Trust.

Summary

NexPoint Residential Trust beats Two Harbors Investment on 10 of the 17 factors compared between the two stocks.

NexPoint Residential Trust Company Profile

NexPoint Residential Trust is a publicly traded REIT, with its shares listed on the New York Stock Exchange under the symbol "NXRT," primarily focused on acquiring, owning and operating well-located middle-income multifamily properties with "value-add" potential in large cities and suburban submarkets of large cities, primarily in the Southeastern and Southwestern United States. NXRT is externally advised by NexPoint Real Estate Advisors, L.P., an affiliate of Highland Capital Management, L.P., a leading global alternative asset manager and an SEC-registered investment adviser.

Two Harbors Investment Company Profile

Two Harbors Investment Corp. operates as a real estate investment trust (REIT) that focuses on investing in, financing, and managing residential mortgage-backed securities (RMBS), non-agency securities, mortgage servicing rights, and other financial assets in the United States. Its target assets include agency RMBS collateralized by fixed rate mortgage loans, adjustable rate mortgage loans, and hybrid adjustable-rate mortgage (ARMs); non-agency securities collateralized by prime mortgage loans, Alt-A mortgage loans, pay-option ARM loans, and subprime mortgage loans; and other assets, such as financial and mortgage-related assets, as well as residential mortgage loans and non-hedging transactions. The company qualifies as a REIT for federal income tax purposes. As a REIT, the company would not be subject to federal income tax, if it distributes at least 90% of net taxable income to its stockholders. Two Harbors Investment Corp. was incorporated in 2009 and is headquartered in New York, New York.

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