Colony Starwood Homes (NYSE: SFR) and AvalonBay Communities (NYSE:AVB) are both mid-cap finance companies, but which is the better business? We will contrast the two companies based on the strength of their profitability, institutional ownership, valuation, dividends, risk, analyst recommendations and earnings.

Valuation and Earnings

This table compares Colony Starwood Homes and AvalonBay Communities’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Colony Starwood Homes $575.68 million 8.15 -$81.26 million ($0.33) -110.73
AvalonBay Communities $2.05 billion 12.18 $1.03 billion $6.40 28.18

AvalonBay Communities has higher revenue and earnings than Colony Starwood Homes. Colony Starwood Homes is trading at a lower price-to-earnings ratio than AvalonBay Communities, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Colony Starwood Homes and AvalonBay Communities’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Colony Starwood Homes -5.65% -0.81% -0.34%
AvalonBay Communities 41.55% 8.66% 4.94%

Dividends

Colony Starwood Homes pays an annual dividend of $0.88 per share and has a dividend yield of 2.4%. AvalonBay Communities pays an annual dividend of $5.68 per share and has a dividend yield of 3.1%. Colony Starwood Homes pays out -266.7% of its earnings in the form of a dividend. AvalonBay Communities pays out 88.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Colony Starwood Homes has raised its dividend for 5 consecutive years.

Institutional & Insider Ownership

97.4% of AvalonBay Communities shares are held by institutional investors. 5.0% of Colony Starwood Homes shares are held by insiders. Comparatively, 0.5% of AvalonBay Communities shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Colony Starwood Homes and AvalonBay Communities, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Colony Starwood Homes 0 5 5 0 2.50
AvalonBay Communities 1 8 8 0 2.41

Colony Starwood Homes presently has a consensus target price of $36.90, suggesting a potential upside of 0.99%. AvalonBay Communities has a consensus target price of $196.86, suggesting a potential upside of 9.15%. Given AvalonBay Communities’ higher possible upside, analysts clearly believe AvalonBay Communities is more favorable than Colony Starwood Homes.

Volatility & Risk

Colony Starwood Homes has a beta of 0.89, indicating that its stock price is 11% less volatile than the S&P 500. Comparatively, AvalonBay Communities has a beta of 0.36, indicating that its stock price is 64% less volatile than the S&P 500.

Summary

AvalonBay Communities beats Colony Starwood Homes on 12 of the 17 factors compared between the two stocks.

Colony Starwood Homes Company Profile

Starwood Waypoint Homes, formerly Colony Starwood Homes, is an internally managed real estate investment trust (REIT). The Company was formed primarily to acquire, renovate, lease and manage residential assets in select markets across the United States. It is focused on acquiring single-family rental (SFR) homes through a variety of channels, renovating these homes to the extent necessary and leasing them to qualified residents. The Company operates through two segments, which are represented by its portfolio of SFR homes and its portfolio of NPLs owned in the joint venture with Prime Asset Fund VI, LLC (Prime). The Company identifies and pursues individual home acquisition opportunities through various sources, including multiple listing services (MLS) listings, foreclosure auctions and short sales. As of December 31, 2016, its SFR portfolio consisted of 31,684 owned homes, including 31,065 rental homes and 619 homes that it does not intend to hold for the long term.

AvalonBay Communities Company Profile

AvalonBay Communities, Inc. is a real estate investment trust (REIT). The Company is focused on the development, redevelopment, acquisition, ownership and operation of multifamily communities primarily in New England, the New York/New Jersey metro area, the Mid-Atlantic, the Pacific Northwest, and Northern and Southern California. Its segments include Established Communities, Other Stabilized Communities and Development/Redevelopment Communities. As of June 30, 2017, the Company owned or held a direct or indirect ownership interest in 287 apartment communities containing 83,123 apartment homes in 10 states and the District of Columbia, of which 23 communities were under development and nine communities were under redevelopment. It operates its apartment communities under three core brands: Avalon, AVA and Eaves by Avalon. Its real estate investments consist of operating apartment communities, communities in various stages of development (Development Communities) and Development Rights.

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