Apollo Commercial Real Estate Finance (NYSE: ARI) and Annaly Capital Management (NYSE:NLY) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their analyst recommendations, institutional ownership, profitabiliy, valuation, dividends, earnings and risk.

Volatility and Risk

Apollo Commercial Real Estate Finance has a beta of 0.66, suggesting that its stock price is 34% less volatile than the S&P 500. Comparatively, Annaly Capital Management has a beta of 0.28, suggesting that its stock price is 72% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and price targets for Apollo Commercial Real Estate Finance and Annaly Capital Management, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Apollo Commercial Real Estate Finance 0 5 1 0 2.17
Annaly Capital Management 1 5 2 0 2.13

Apollo Commercial Real Estate Finance currently has a consensus price target of $18.00, indicating a potential downside of 1.59%. Annaly Capital Management has a consensus price target of $11.18, indicating a potential downside of 8.45%. Given Apollo Commercial Real Estate Finance’s stronger consensus rating and higher probable upside, equities research analysts plainly believe Apollo Commercial Real Estate Finance is more favorable than Annaly Capital Management.

Institutional & Insider Ownership

49.8% of Apollo Commercial Real Estate Finance shares are owned by institutional investors. Comparatively, 54.8% of Annaly Capital Management shares are owned by institutional investors. 0.6% of Apollo Commercial Real Estate Finance shares are owned by company insiders. Comparatively, 0.5% of Annaly Capital Management shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Dividends

Apollo Commercial Real Estate Finance pays an annual dividend of $1.84 per share and has a dividend yield of 10.1%. Annaly Capital Management pays an annual dividend of $1.20 per share and has a dividend yield of 9.8%. Apollo Commercial Real Estate Finance pays out 96.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Annaly Capital Management pays out 46.5% of its earnings in the form of a dividend. Annaly Capital Management has raised its dividend for 2 consecutive years.

Valuation & Earnings

This table compares Apollo Commercial Real Estate Finance and Annaly Capital Management’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Apollo Commercial Real Estate Finance $196.62 million 8.52 $174.11 million $1.90 9.63
Annaly Capital Management $3.06 billion 4.07 $2.63 billion $2.58 4.73

Annaly Capital Management has higher revenue and earnings than Apollo Commercial Real Estate Finance. Annaly Capital Management is trading at a lower price-to-earnings ratio than Apollo Commercial Real Estate Finance, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Apollo Commercial Real Estate Finance and Annaly Capital Management’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Apollo Commercial Real Estate Finance 88.07% 9.79% 5.04%
Annaly Capital Management 113.76% 11.08% 1.50%

Summary

Annaly Capital Management beats Apollo Commercial Real Estate Finance on 10 of the 17 factors compared between the two stocks.

Apollo Commercial Real Estate Finance Company Profile

Apollo Commercial Real Estate Finance, Inc. is a real estate investment trust. The Company primarily originates, acquires, invests in and manages performing commercial first mortgage loans, subordinate financings, commercial mortgage-backed securities (CMBS) and other commercial real estate-related debt investments. The Company targets investments that are secured by institutional quality real estate. The Company’s principal business objective is to make investments in its target assets in order to provide attractive risk adjusted returns to its stockholders over the long term, primarily through dividends and secondarily through capital appreciation. The Company is externally managed and advised by ACREFI Management, LLC.

Annaly Capital Management Company Profile

Annaly Capital Management, Inc. is a mortgage real estate investment trust (REIT). The Company owns a portfolio of real estate related investments. Its investment groups primarily consist of Agency, which invests primarily in various types of Agency mortgage-backed securities and related derivatives to hedge these investments; Residential credit, which invests primarily in non-Agency mortgage-backed assets within securitized products and residential mortgage loan markets; Commercial real estate, which originates and invests in commercial mortgage loans, securities, and other commercial real estate investments, and Middle market, which provides customized debt financing to middle-market businesses. Its business operations consist of Annaly Commercial Real Estate Group, Inc., which is its subsidiary that specializes in originating or acquiring, financing and managing commercial loans and other commercial real estate debt; Annaly Middle Market Lending LLC, and RCap Securities, Inc.

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