New Residential Investment Corp. (NYSE: NRZ) and Ares Commercial Real Estate Corporation (NYSE:ACRE) are both finance companies, but which is the superior business? We will compare the two businesses based on the strength of their institutional ownership, risk, analyst recommendations, earnings, valuation, profitability and dividends.

Dividends

New Residential Investment Corp. pays an annual dividend of $2.00 per share and has a dividend yield of 11.7%. Ares Commercial Real Estate Corporation pays an annual dividend of $1.08 per share and has a dividend yield of 8.0%. New Residential Investment Corp. pays out 72.2% of its earnings in the form of a dividend. Ares Commercial Real Estate Corporation pays out 77.1% 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 Corporation has increased its dividend for 3 consecutive years. New Residential Investment Corp. is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility and Risk

New Residential Investment Corp. has a beta of 1.03, indicating that its stock price is 3% more volatile than the S&P 500. Comparatively, Ares Commercial Real Estate Corporation has a beta of 0.69, indicating that its stock price is 31% less volatile than the S&P 500.

Valuation & Earnings

This table compares New Residential Investment Corp. and Ares Commercial Real Estate Corporation’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
New Residential Investment Corp. $1.30 billion 4.03 $851.39 million $2.77 6.15
Ares Commercial Real Estate Corporation $45.12 million 8.58 $39.98 million $1.40 9.68

New Residential Investment Corp. has higher revenue and earnings than Ares Commercial Real Estate Corporation. New Residential Investment Corp. is trading at a lower price-to-earnings ratio than Ares Commercial Real Estate Corporation, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

48.1% of New Residential Investment Corp. shares are held by institutional investors. Comparatively, 65.2% of Ares Commercial Real Estate Corporation shares are held by institutional investors. 4.0% of New Residential Investment Corp. shares are held by company insiders. Comparatively, 1.8% of Ares Commercial Real Estate Corporation 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.

Profitability

This table compares New Residential Investment Corp. and Ares Commercial Real Estate Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
New Residential Investment Corp. 55.85% 19.02% 3.80%
Ares Commercial Real Estate Corporation 45.06% 7.07% 2.03%

Analyst Ratings

This is a breakdown of recent recommendations and price targets for New Residential Investment Corp. and Ares Commercial Real Estate Corporation, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
New Residential Investment Corp. 0 2 5 0 2.71
Ares Commercial Real Estate Corporation 1 2 3 0 2.33

New Residential Investment Corp. currently has a consensus target price of $16.83, indicating a potential downside of 1.15%. Ares Commercial Real Estate Corporation has a consensus target price of $14.31, indicating a potential upside of 5.63%. Given Ares Commercial Real Estate Corporation’s higher possible upside, analysts clearly believe Ares Commercial Real Estate Corporation is more favorable than New Residential Investment Corp..

Summary

New Residential Investment Corp. beats Ares Commercial Real Estate Corporation on 12 of the 17 factors compared between the two stocks.

New Residential Investment Corp. Company Profile

New Residential Investment Corp. is a real estate investment trust (REIT). The Company focuses on investing in, and managing, investments related to residential real estate. The Company’s segments include investments in excess mortgage servicing rights (Excess MSRs); investments in mortgage servicing rights (MSRs); investments in servicer advances; investments in real estate securities; investments in residential mortgage loans; investments in consumer loans, and corporate. Its portfolio includes mortgage servicing related assets, residential mortgage backed securities (RMBS), residential mortgage loans and other investments. The Company’s servicing related assets include its investments in Excess MSRs, MSRs and servicer advances. The Company invests in agency RMBS and non-agency RMBS. The Company’s other investments consist of consumer loans.

Ares Commercial Real Estate Corporation Company Profile

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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