Reviewing Hatteras Financial Corp. (HTS) & Ares Commercial Real Estate Corporation (ACRE)
Hatteras Financial Corp. (NYSE: HTS) and Ares Commercial Real Estate Corporation (NYSE:ACRE) are both financials companies, but which is the better business? We will compare the two businesses based on the strength of their profitability, dividends, institutional ownership, earnings, valuation, risk and analyst recommendations.
Institutional & Insider Ownership
65.1% of Ares Commercial Real Estate Corporation shares are owned by institutional investors. 1.8% of Ares Commercial Real Estate Corporation shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.
This table compares Hatteras Financial 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|
|Hatteras Financial Corp.||N/A||-16.93%||-1.89%|
|Ares Commercial Real Estate Corporation||45.06%||7.07%||2.03%|
Hatteras Financial Corp. pays an annual dividend of $1.80 per share and has a dividend yield of 11.0%. Ares Commercial Real Estate Corporation pays an annual dividend of $1.08 per share and has a dividend yield of 8.2%. Hatteras Financial Corp. pays out 580.6% 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 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.
Earnings and Valuation
This table compares Hatteras Financial Corp. and Ares Commercial Real Estate Corporation’s top-line revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Hatteras Financial Corp.||N/A||N/A||N/A||$0.31||52.55|
|Ares Commercial Real Estate Corporation||$45.12 million||8.38||$39.98 million||$1.40||9.46|
Ares Commercial Real Estate Corporation has higher revenue and earnings than Hatteras Financial Corp.. Ares Commercial Real Estate Corporation is trading at a lower price-to-earnings ratio than Hatteras Financial Corp., indicating that it is currently the more affordable of the two stocks.
This is a summary of recent recommendations for Hatteras Financial Corp. and Ares Commercial Real Estate Corporation, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Hatteras Financial Corp.||0||0||0||0||N/A|
|Ares Commercial Real Estate Corporation||1||2||3||0||2.33|
Ares Commercial Real Estate Corporation has a consensus target price of $14.31, indicating a potential upside of 8.10%. Given Ares Commercial Real Estate Corporation’s higher probable upside, analysts clearly believe Ares Commercial Real Estate Corporation is more favorable than Hatteras Financial Corp..
Volatility & Risk
Hatteras Financial Corp. has a beta of 0.3, indicating that its share price is 70% less volatile than the S&P 500. Comparatively, Ares Commercial Real Estate Corporation has a beta of 0.69, indicating that its share price is 31% less volatile than the S&P 500.
Ares Commercial Real Estate Corporation beats Hatteras Financial Corp. on 11 of the 12 factors compared between the two stocks.
About Hatteras Financial Corp.
Hatteras Financial Corp. is an externally managed mortgage real estate investment trust (REIT) that invests in single-family residential mortgage real estate assets, such as mortgage-backed security (MBS), mortgage servicing right (MSR), residential mortgage loans and other financial assets. MBS are pass-through securities consisting of a pool of mortgage loans. Its primary business is owning and managing agency securities, with a primary focus on adjustable-rate mortgage securities. Its primary investment assets include Agency MBS; other agency issued securities, such as credit-risk transfer bonds; MSR; non-agency securities; residential mortgage loans, and other real estate related assets as permitted by its investment guidelines and REIT requirements. Its business operations consist of the Hatteras Financial Corp., Onslow Bay Financial LLC, First Winston Securities, Inc. and Wind River TRS LLC. It is externally managed and advised by its manager, Atlantic Capital Advisors LLC.
About Ares Commercial Real Estate Corporation
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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