Reviewing Prologis (NYSE:PLD) and Ares Commercial Real Estate (NYSE:ACRE)

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Prologis (NYSE:PLD) and Ares Commercial Real Estate (NYSE:ACRE) are both finance companies, but which is the superior business? We will contrast the two companies based on the strength of their profitability, institutional ownership, dividends, valuation, analyst recommendations, earnings and risk.

Dividends

Prologis pays an annual dividend of $2.12 per share and has a dividend yield of 2.6%. Ares Commercial Real Estate pays an annual dividend of $1.32 per share and has a dividend yield of 8.7%. Prologis pays out 70.0% of its earnings in the form of a dividend. Ares Commercial Real Estate pays out 95.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Prologis has raised its dividend for 5 consecutive years and Ares Commercial Real Estate has raised its dividend for 3 consecutive years.

Valuation and Earnings

This table compares Prologis and Ares Commercial Real Estate’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Prologis $2.80 billion 18.28 $1.65 billion $3.03 26.80
Ares Commercial Real Estate $118.28 million 3.72 $38.60 million $1.39 10.96

Prologis has higher revenue and earnings than Ares Commercial Real Estate. Ares Commercial Real Estate is trading at a lower price-to-earnings ratio than Prologis, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

95.4% of Prologis shares are held by institutional investors. Comparatively, 67.9% of Ares Commercial Real Estate shares are held by institutional investors. 1.1% of Prologis shares are held by insiders. Comparatively, 2.2% of Ares Commercial Real Estate 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.

Analyst Recommendations

This is a summary of recent ratings and target prices for Prologis and Ares Commercial Real Estate, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Prologis 0 4 10 1 2.80
Ares Commercial Real Estate 0 2 1 1 2.75

Prologis presently has a consensus price target of $77.73, suggesting a potential downside of 4.28%. Ares Commercial Real Estate has a consensus price target of $14.67, suggesting a potential downside of 3.70%. Given Ares Commercial Real Estate’s higher possible upside, analysts clearly believe Ares Commercial Real Estate is more favorable than Prologis.

Risk and Volatility

Prologis has a beta of 1.03, suggesting that its share price is 3% more volatile than the S&P 500. Comparatively, Ares Commercial Real Estate has a beta of 0.59, suggesting that its share price is 41% less volatile than the S&P 500.

Profitability

This table compares Prologis and Ares Commercial Real Estate’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Prologis 55.04% 6.55% 4.37%
Ares Commercial Real Estate 32.10% 9.29% 2.38%

Summary

Prologis beats Ares Commercial Real Estate on 13 of the 17 factors compared between the two stocks.

Prologis Company Profile

Prologis, Inc. is the global leader in logistics real estate with a focus on high-barrier, high-growth markets. As of December 31, 2018, the company owned or had investments in, on a wholly owned basis or through co-investment ventures, properties and development projects expected to total approximately 768 million square feet (71 million square meters) in 19 countries. Prologis leases modern distribution facilities to a diverse base of approximately 5,100 customers across two major categories: business-to-business and retail/online fulfillment.

Ares Commercial Real Estate Company Profile

Ares Commercial Real Estate Corporation, a specialty finance company, originates and invests in commercial real estate loans and related investments in the United States. It provides a range of financing solutions for the owners, operators, and sponsors of commercial real estate (CRE) properties. The company originates senior mortgage loans, subordinate debt products, real estate preferred equity investments, mezzanine loans, and other CRE investments. Ares Commercial Real Estate Corporation 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. Ares Commercial Real Estate Management LLC operates as the manager of the company. The company was founded in 2011 and is headquartered in New York, New York.

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