Ares Commercial Real Estate Corporation (NYSE: ACRE) and Apollo Commercial Real Estate Finance (NYSE:ARI) are both small-cap financials companies, but which is the better business? We will contrast the two companies based on the strength of their analyst recommendations, earnings, institutional ownership, risk, dividends, valuation and profitability.

Volatility and Risk

Ares Commercial Real Estate Corporation has a beta of 0.68, indicating that its stock price is 32% less volatile than the S&P 500. Comparatively, Apollo Commercial Real Estate Finance has a beta of 0.63, indicating that its stock price is 37% less volatile than the S&P 500.

Institutional and Insider Ownership

63.4% of Ares Commercial Real Estate Corporation shares are held by institutional investors. Comparatively, 64.5% of Apollo Commercial Real Estate Finance shares are held by institutional investors. 1.8% of Ares Commercial Real Estate Corporation shares are held by company insiders. Comparatively, 0.6% of Apollo Commercial Real Estate Finance shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Profitability

This table compares Ares Commercial Real Estate Corporation and Apollo Commercial Real Estate Finance’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ares Commercial Real Estate Corporation 33.69% 7.76% 2.16%
Apollo Commercial Real Estate Finance 86.07% 10.32% 5.57%

Valuation & Earnings

This table compares Ares Commercial Real Estate Corporation and Apollo Commercial Real Estate Finance’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Ares Commercial Real Estate Corporation $81.96 million 4.66 $40.33 million $1.13 11.82
Apollo Commercial Real Estate Finance $200.62 million 9.93 $157.87 million $1.79 10.39

Apollo Commercial Real Estate Finance has higher revenue and earnings than Ares Commercial Real Estate Corporation. Apollo Commercial Real Estate Finance 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.

Dividends

Ares Commercial Real Estate Corporation pays an annual dividend of $1.08 per share and has a dividend yield of 8.1%. Apollo Commercial Real Estate Finance pays an annual dividend of $1.84 per share and has a dividend yield of 9.9%. Ares Commercial Real Estate Corporation pays out 95.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Apollo Commercial Real Estate Finance pays out 102.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Apollo Commercial Real Estate Finance has increased its dividend for 2 consecutive years. Apollo Commercial Real Estate Finance is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a summary of recent ratings and target prices for Ares Commercial Real Estate Corporation and Apollo Commercial Real Estate Finance, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ares Commercial Real Estate Corporation 1 2 3 0 2.33
Apollo Commercial Real Estate Finance 0 3 1 0 2.25

Ares Commercial Real Estate Corporation presently has a consensus price target of $14.42, indicating a potential upside of 7.91%. Apollo Commercial Real Estate Finance has a consensus price target of $18.50, indicating a potential downside of 0.54%. Given Ares Commercial Real Estate Corporation’s stronger consensus rating and higher probable upside, analysts clearly believe Ares Commercial Real Estate Corporation is more favorable than Apollo Commercial Real Estate Finance.

Summary

Apollo Commercial Real Estate Finance beats Ares Commercial Real Estate Corporation on 10 of the 17 factors compared between the two stocks.

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.

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.

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