Contrasting AFC Gamma (NASDAQ:AFCG) and Starwood Property Trust (NYSE:STWD)

AFC Gamma (NASDAQ:AFCG) and Starwood Property Trust (NYSE:STWD) are both finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their profitability, valuation, analyst recommendations, earnings, institutional ownership, risk and dividends.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for AFC Gamma and Starwood Property Trust, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
AFC Gamma	1	3	0	0	1.75
Starwood Property Trust	0	3	3	0	2.50

AFC Gamma currently has a consensus target price of $5.75, indicating a potential upside of 138.59%. Starwood Property Trust has a consensus target price of $20.63, indicating a potential upside of 16.49%. Given AFC Gamma’s higher probable upside, research analysts plainly believe AFC Gamma is more favorable than Starwood Property Trust.

Dividends

AFC Gamma pays an annual dividend of $0.60 per share and has a dividend yield of 24.9%. Starwood Property Trust pays an annual dividend of $1.92 per share and has a dividend yield of 10.8%. AFC Gamma pays out -57.7% of its earnings in the form of a dividend. Starwood Property Trust pays out 182.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. AFC Gamma is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider and Institutional Ownership

26.5% of AFC Gamma shares are owned by institutional investors. Comparatively, 49.8% of Starwood Property Trust shares are owned by institutional investors. 25.1% of AFC Gamma shares are owned by insiders. Comparatively, 5.4% of Starwood Property Trust shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Risk & Volatility

AFC Gamma has a beta of 1.02, meaning that its share price is 2% more volatile than the S&P 500. Comparatively, Starwood Property Trust has a beta of 1.13, meaning that its share price is 13% more volatile than the S&P 500.

Profitability

This table compares AFC Gamma and Starwood Property Trust’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
AFC Gamma	-70.46%	8.45%	4.90%
Starwood Property Trust	20.28%	8.41%	0.92%

Earnings & Valuation

This table compares AFC Gamma and Starwood Property Trust”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
AFC Gamma	$51.99 million	1.05	$16.78 million	($1.04)	-2.32
Starwood Property Trust	$1.95 billion	3.37	$359.93 million	$1.05	16.86

Starwood Property Trust has higher revenue and earnings than AFC Gamma. AFC Gamma is trading at a lower price-to-earnings ratio than Starwood Property Trust, indicating that it is currently the more affordable of the two stocks.

Summary

Starwood Property Trust beats AFC Gamma on 10 of the 16 factors compared between the two stocks.

About AFC Gamma

AFC Gamma, Inc. originates, structures, underwrites, and invests in senior secured loans, and other various commercial real estate loans and debt securities for established companies operating in the cannabis industry. It primarily originates loans structured as senior loans secured by real estate, equipment, and licenses and/or other assets of the loan parties to the extent permitted by applicable laws and the regulations governing such loan parties. The company has elected and qualified to be taxed as a real estate investment trust for the United States federal income tax purposes under the Internal Revenue Code of 1986. AFC Gamma, Inc. was incorporated in 2020 and is based in West Palm Beach, Florida.

About Starwood Property Trust

Starwood Property Trust, Inc. operates as a real estate investment trust (REIT) in the United States and internationally. The company operates through Commercial and Residential Lending, Infrastructure Lending, Property, and Investing and Servicing segments. The Commercial and Residential Lending segment originates, acquires, finances, and manages commercial first mortgages, non-agency residential mortgages, subordinated mortgages, mezzanine loans, preferred equity, commercial mortgage-backed securities (CMBS), and residential mortgage-backed securities, as well as other real estate and real estate-related debt investments, include distressed or non-performing loans. The Infrastructure lending segment originates, acquires, finances, and manages infrastructure debt investments. The Property segment engages primarily in acquiring and managing equity interests in stabilized commercial real estate properties, such as multifamily properties and commercial properties subject to net leases, that are held for investment. The Investing and Servicing segment manages and works out problem assets; acquires and manages unrated, investment grade, and non-investment grade rated CMBS comprising subordinated interests of securitization and re-securitization transactions; originates conduit loans for the primary purpose of selling these loans into securitization transactions; and acquires commercial real estate assets that include properties acquired from CMBS trusts. The company qualifies as a REIT for federal income tax purposes and would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. The company was incorporated in 2009 and is headquartered in Greenwich, Connecticut.