The RMR Group (NASDAQ: RMR) and Gafisa (NYSE:GFA) are both small-cap finance companies, but which is the superior business? We will compare the two companies based on the strength of their earnings, institutional ownership, profitability, valuation, analyst recommendations, risk and dividends.

Insider & Institutional Ownership

34.5% of The RMR Group shares are held by institutional investors. Comparatively, 3.9% of Gafisa shares are held by institutional investors. 55.3% of The RMR Group shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares The RMR Group and Gafisa’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
The RMR Group $266.94 million 3.33 $37.24 million $2.78 21.21
Gafisa $263.80 million 0.63 -$333.60 million ($30.65) -0.39

The RMR Group has higher revenue and earnings than Gafisa. Gafisa is trading at a lower price-to-earnings ratio than The RMR Group, indicating that it is currently the more affordable of the two stocks.

Dividends

The RMR Group pays an annual dividend of $1.00 per share and has a dividend yield of 1.7%. Gafisa does not pay a dividend. The RMR Group pays out 36.0% of its earnings in the form of a dividend.

Analyst Recommendations

This is a breakdown of recent ratings for The RMR Group and Gafisa, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
The RMR Group 0 3 2 0 2.40
Gafisa 2 0 0 0 1.00

The RMR Group currently has a consensus target price of $59.50, suggesting a potential upside of 0.93%. Given The RMR Group’s stronger consensus rating and higher probable upside, equities analysts clearly believe The RMR Group is more favorable than Gafisa.

Profitability

This table compares The RMR Group and Gafisa’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
The RMR Group 16.44% 10.14% 7.43%
Gafisa -195.79% -34.52% -11.97%

Volatility and Risk

The RMR Group has a beta of -0.71, indicating that its share price is 171% less volatile than the S&P 500. Comparatively, Gafisa has a beta of 1.92, indicating that its share price is 92% more volatile than the S&P 500.

Summary

The RMR Group beats Gafisa on 13 of the 15 factors compared between the two stocks.

The RMR Group Company Profile

The RMR Group Inc. is a holding company. The Company’s business is primarily conducted by its subsidiary, The RMR Group LLC (RMR LLC). The Company’s segments include RMR LLC and All Other Operations. RMR LLC manages a portfolio of publicly owned real estate and real estate related businesses. RMR LLC manages Government Properties Income Trust, a real estate investment trust (REIT) that primarily owns properties that are leased to government tenants; Hospitality Properties Trust, an REIT that primarily owns hotels and travel centers; Select Income REIT, an REIT that primarily owns properties leased to single tenants across the United States and leased lands in Hawaii, and Senior Housing Properties Trust, an REIT that primarily owns senior living communities and medical office buildings. As of June 30, 2016, RMR LLC managed over 1,300 properties, which were located in 48 states, Washington, District of Columbia, Puerto Rico and Canada.

Gafisa Company Profile

Gafisa S.A. is a diversified national homebuilder. The Company’s segments are Gafisa (for ventures targeted at high and medium income) and Tenda (for ventures targeted at low income). The Company’s brands include Tenda, which serves the affordable entry-level housing segments, Gafisa, which offers a range of residential options to the mid to higher income segments and Alphaville (equity method investment), which focuses on the identification, development and sale of residential communities. In addition, it provides construction services to third parties on certain developments in the Gafisa segment where it retains an equity interest. Its real estate business activities include developments for sale of residential units, land subdivisions and commercial buildings; construction services, and sale of units through its brokerage subsidiaries, Gafisa Vendas Intermediacao Imobiliaria Ltda and Gafisa Vendas in Rio de Janeiro, jointly referred to as Gafisa Vendas.

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