Critical Review: Orion Office REIT (NYSE:ONL) versus Highwoods Properties (NYSE:HIW)

Highwoods Properties (NYSE:HIW) and Orion Office REIT (NYSE:ONL) are both finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their valuation, profitability, dividends, analyst recommendations, earnings, institutional ownership and risk.

Institutional and Insider Ownership

96.3% of Highwoods Properties shares are held by institutional investors. Comparatively, 80.0% of Orion Office REIT shares are held by institutional investors. 1.9% of Highwoods Properties shares are held by insiders. Comparatively, 0.2% of Orion Office REIT shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Risk and Volatility

Highwoods Properties has a beta of 1.07, suggesting that its stock price is 7% more volatile than the S&P 500. Comparatively, Orion Office REIT has a beta of 1.37, suggesting that its stock price is 37% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings and price targets for Highwoods Properties and Orion Office REIT, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Highwoods Properties	1	5	2	0	2.13
Orion Office REIT	1	1	1	0	2.00

Highwoods Properties presently has a consensus target price of $27.78, indicating a potential upside of 34.78%. Orion Office REIT has a consensus target price of $3.00, indicating a potential upside of 48.88%. Given Orion Office REIT’s higher probable upside, analysts plainly believe Orion Office REIT is more favorable than Highwoods Properties.

Profitability

This table compares Highwoods Properties and Orion Office REIT’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Highwoods Properties	20.10%	6.86%	2.64%
Orion Office REIT	-94.35%	-20.13%	-11.12%

Dividends

Highwoods Properties pays an annual dividend of $2.00 per share and has a dividend yield of 9.7%. Orion Office REIT pays an annual dividend of $0.08 per share and has a dividend yield of 4.0%. Highwoods Properties pays out 137.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Orion Office REIT pays out -3.2% of its earnings in the form of a dividend.

Valuation & Earnings

This table compares Highwoods Properties and Orion Office REIT”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Highwoods Properties	$806.11 million	2.81	$159.61 million	$1.46	14.12
Orion Office REIT	$147.65 million	0.77	-$139.31 million	($2.49)	-0.81

Highwoods Properties has higher revenue and earnings than Orion Office REIT. Orion Office REIT is trading at a lower price-to-earnings ratio than Highwoods Properties, indicating that it is currently the more affordable of the two stocks.

Summary

Highwoods Properties beats Orion Office REIT on 13 of the 16 factors compared between the two stocks.

About Highwoods Properties

Highwoods Properties, Inc., headquartered in Raleigh, is a publicly-traded (NYSE:HIW), fully-integrated office real estate investment trust (REIT) that owns, develops, acquires, leases and manages properties primarily in the best business districts (BBDs) of Atlanta, Charlotte, Dallas, Nashville, Orlando, Raleigh, Richmond and Tampa. Highwoods is in the work-placemaking business. We believe that by creating environments and experiences where the best and brightest can achieve together what they cannot apart, we can deliver greater value to our customers, their teammates and, in turn, our stakeholders.

About Orion Office REIT

Orion Office REIT specializes in the ownership, acquisition and management of a diversified portfolio of mission-critical and corporate headquarters office buildings in high-quality suburban markets across the U.S. The portfolio is leased primarily on a single-tenant net lease basis to creditworthy tenants. The company's team of experienced industry leaders employs a proven, cycle-tested investment evaluation framework which serves as the lens through which capital allocation decisions are made for the current portfolio and future acquisitions.