Apollo Commercial Real Estate Finance (NYSE:ARI) and Starwood Property Trust (NYSE:STWD) are both mid-cap finance companies, but which is the superior business? We will compare the two businesses based on the strength of their institutional ownership, earnings, dividends, analyst recommendations, valuation, risk and profitability.
Earnings & Valuation
This table compares Apollo Commercial Real Estate Finance and Starwood Property Trust's top-line revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio |
|---|
| Apollo Commercial Real Estate Finance | $278.68 million | 7.98 | $18.38 million | $1.40 | 11.36 |
| Starwood Property Trust | $1.14 billion | 6.39 | $331.69 million | $1.87 | 13.52 |
Starwood Property Trust has higher revenue and earnings than Apollo Commercial Real Estate Finance. Apollo Commercial Real Estate Finance is trading at a lower price-to-earnings ratio than Starwood Property Trust, indicating that it is currently the more affordable of the two stocks.
Profitability
This table compares Apollo Commercial Real Estate Finance and Starwood Property Trust's net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets |
|---|
| Apollo Commercial Real Estate Finance | 74.34% | 9.15% | 3.01% |
| Starwood Property Trust | 45.90% | 11.02% | 0.67% |
Dividends
Apollo Commercial Real Estate Finance pays an annual dividend of $1.40 per share and has a dividend yield of 8.8%. Starwood Property Trust pays an annual dividend of $1.92 per share and has a dividend yield of 7.6%. Apollo Commercial Real Estate Finance 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. Starwood Property Trust pays out 102.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Apollo Commercial Real Estate Finance has increased its dividend for 1 consecutive years and Starwood Property Trust has increased its dividend for 1 consecutive years. Apollo Commercial Real Estate Finance is clearly the better dividend stock, given its higher yield and lower payout ratio.
Analyst Recommendations
This is a breakdown of current recommendations for Apollo Commercial Real Estate Finance and Starwood Property Trust, as reported by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score |
|---|
| Apollo Commercial Real Estate Finance | 0 | 3 | 0 | 0 | 2.00 |
| Starwood Property Trust | 0 | 1 | 4 | 0 | 2.80 |
Apollo Commercial Real Estate Finance presently has a consensus price target of $15.00, suggesting a potential downside of 5.66%. Starwood Property Trust has a consensus price target of $27.1250, suggesting a potential upside of 7.26%. Given Starwood Property Trust's stronger consensus rating and higher probable upside, analysts plainly believe Starwood Property Trust is more favorable than Apollo Commercial Real Estate Finance.
Volatility and Risk
Apollo Commercial Real Estate Finance has a beta of 1.3, meaning that its share price is 30% more volatile than the S&P 500. Comparatively, Starwood Property Trust has a beta of 1.65, meaning that its share price is 65% more volatile than the S&P 500.
Institutional & Insider Ownership
60.4% of Apollo Commercial Real Estate Finance shares are owned by institutional investors. Comparatively, 46.1% of Starwood Property Trust shares are owned by institutional investors. 0.6% of Apollo Commercial Real Estate Finance shares are owned by company insiders. Comparatively, 4.7% of Starwood Property Trust shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.
Summary
Starwood Property Trust beats Apollo Commercial Real Estate Finance on 10 of the 16 factors compared between the two stocks.
