First Potomac Realty Trust (NYSE: FPO) and Gladstone Commercial (NASDAQ:GOOD) are both small-cap financials companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, dividends, analyst recommendations, earnings, risk, profitability and valuation.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for First Potomac Realty Trust and Gladstone Commercial, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
First Potomac Realty Trust 2 1 1 0 1.75
Gladstone Commercial 0 3 2 0 2.40

First Potomac Realty Trust presently has a consensus target price of $11.29, indicating a potential upside of 1.32%. Gladstone Commercial has a consensus target price of $22.50, indicating a potential upside of 3.83%. Given Gladstone Commercial’s stronger consensus rating and higher possible upside, analysts plainly believe Gladstone Commercial is more favorable than First Potomac Realty Trust.

Profitability

This table compares First Potomac Realty Trust and Gladstone Commercial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
First Potomac Realty Trust -7.99% -2.35% -0.94%
Gladstone Commercial 10.59% 3.96% 1.13%

Institutional & Insider Ownership

93.1% of First Potomac Realty Trust shares are owned by institutional investors. Comparatively, 52.8% of Gladstone Commercial shares are owned by institutional investors. 2.1% of First Potomac Realty Trust shares are owned by insiders. Comparatively, 2.2% of Gladstone Commercial shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Valuation & Earnings

This table compares First Potomac Realty Trust and Gladstone Commercial’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
First Potomac Realty Trust N/A N/A N/A $0.69 16.14
Gladstone Commercial $86.37 million 6.95 $3.95 million ($0.03) -722.33

Gladstone Commercial has higher revenue and earnings than First Potomac Realty Trust. Gladstone Commercial is trading at a lower price-to-earnings ratio than First Potomac Realty Trust, indicating that it is currently the more affordable of the two stocks.

Risk & Volatility

First Potomac Realty Trust has a beta of 0.8, meaning that its share price is 20% less volatile than the S&P 500. Comparatively, Gladstone Commercial has a beta of 0.86, meaning that its share price is 14% less volatile than the S&P 500.

Dividends

First Potomac Realty Trust pays an annual dividend of $0.40 per share and has a dividend yield of 3.6%. Gladstone Commercial pays an annual dividend of $1.50 per share and has a dividend yield of 6.9%. First Potomac Realty Trust pays out 58.0% of its earnings in the form of a dividend. Gladstone Commercial pays out -5,000.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Gladstone Commercial is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Gladstone Commercial beats First Potomac Realty Trust on 11 of the 13 factors compared between the two stocks.

First Potomac Realty Trust Company Profile

First Potomac Realty Trust (First Potomac) is engaged in ownership, management, redevelopment and development of office and business park properties in the greater Washington, D.C. region. The Company’s segments include Washington, D.C., Maryland, Northern Virginia and Southern Virginia. The Company conducts its business through First Potomac Realty Investment Limited Partnership, its operating partnership. The Company’s portfolio consist a mix of single-tenant and multi-tenant office properties, and business parks. The office properties are single-story and multi-story buildings that are primarily for office uses, and business parks consists of buildings with office features combined with some industrial property space. As of December 31, 2016, the Company owned properties totaling 6.7 million square feet and had a non-controlling ownership interest in properties totaling an additional 0.9 million square feet through five unconsolidated joint ventures.

Gladstone Commercial Company Profile

Gladstone Commercial Corporation is a real estate investment trust. The Company focuses on acquiring, owning and managing primarily office and industrial properties. The Company also makes long-term industrial and commercial mortgage loans. As of February 15, 2017, the Company owned 95 properties totaling 10.9 million square feet in 24 states. As of December 31, 2016, the Company’s properties were located in various states of the United States, such as Ohio, Pennsylvania, North Carolina, Georgia, South Carolina, Michigan, Minnesota, Colorado and New Jersey. The Company’s properties have tenants from various industries, such as telecommunications; healthcare; automobile; electronics; information technology; chemicals, plastics and rubber; containers, packaging and glass; personal and non-durable consumer products; machinery; banking; childcare; buildings and real estate; beverage, food and tobacco; printing and publishing; education; home and office furnishings, and oil and gas.

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