Critical Analysis: American Campus Communities (ACC) and Two Harbors Investment (TWO)
American Campus Communities (NYSE: ACC) and Two Harbors Investment (NYSE:TWO) are both mid-cap finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their risk, valuation, institutional ownership, earnings, profitability, dividends and analyst recommendations.
This table compares American Campus Communities and Two Harbors Investment’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|American Campus Communities||7.16%||1.58%||0.89%|
|Two Harbors Investment||63.23%||10.27%||1.52%|
This table compares American Campus Communities and Two Harbors Investment’s gross revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|American Campus Communities||$786.36 million||6.87||$99.06 million||$0.41||96.56|
|Two Harbors Investment||$633.49 million||4.37||$353.27 million||$2.90||5.47|
Two Harbors Investment has lower revenue, but higher earnings than American Campus Communities. Two Harbors Investment is trading at a lower price-to-earnings ratio than American Campus Communities, indicating that it is currently the more affordable of the two stocks.
Risk & Volatility
American Campus Communities has a beta of 0.28, meaning that its share price is 72% less volatile than the S&P 500. Comparatively, Two Harbors Investment has a beta of 0.52, meaning that its share price is 48% less volatile than the S&P 500.
This is a breakdown of recent ratings and price targets for American Campus Communities and Two Harbors Investment, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|American Campus Communities||1||5||8||0||2.50|
|Two Harbors Investment||0||2||4||0||2.67|
American Campus Communities currently has a consensus target price of $50.00, indicating a potential upside of 26.29%. Two Harbors Investment has a consensus target price of $17.92, indicating a potential upside of 12.97%. Given American Campus Communities’ higher probable upside, research analysts clearly believe American Campus Communities is more favorable than Two Harbors Investment.
American Campus Communities pays an annual dividend of $1.76 per share and has a dividend yield of 4.4%. Two Harbors Investment pays an annual dividend of $2.10 per share and has a dividend yield of 13.2%. American Campus Communities pays out 429.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Two Harbors Investment pays out 72.4% of its earnings in the form of a dividend. Two Harbors Investment has increased its dividend for 4 consecutive years. Two Harbors Investment is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Two Harbors Investment beats American Campus Communities on 10 of the 15 factors compared between the two stocks.
About American Campus Communities
American Campus Communities, Inc. is a self-managed and self-administered equity real estate investment trust (REIT). The Company’s segments include Wholly-Owned Properties, On-Campus Participating Properties, Development Services, and Property Management Services. It is engaged in the acquisition, design, financing, development, construction management, leasing and management of student housing properties. The Wholly-Owned Properties segment consists of off-campus properties, which are located in close proximity to the school campus. The On-Campus Participating Properties segment includes on-campus properties that are operated under long-term ground/facility leases with three university systems. The Development Services segment consists of development and construction management services that it provides through one of its taxable REIT subsidiaries for third-party owners. The Property Management Services segment includes revenues generated from third-party management contracts.
About Two Harbors Investment
Two Harbors Investment Corp. is a real estate investment trust. The Company is focused on investing in, financing and managing residential mortgage-backed securities (RMBS), mortgage servicing rights (MSR), commercial real estate and other financial assets (collectively known as target assets). Its investment objective is to provide attractive risk-adjusted total return to its stockholders over the long-term, primarily through dividends and secondarily through capital appreciation. The Company focuses on managing various associated risks, including interest rate, prepayment, credit, mortgage spread and financing risk. The Company finances its RMBS and commercial real estate assets through short- and long-term borrowings structured as repurchase agreements and advances from the Federal Home Loan Bank of Des Moines, or the FHLB. It also finances its MSR through revolving credit facilities.
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