Critical Contrast: Sotherly Hotels (SOHO) and Ashford Hospitality Prime (AHP)

Sotherly Hotels (NASDAQ: SOHO) and Ashford Hospitality Prime (NYSE:AHP) are both small-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their institutional ownership, dividends, earnings, risk, valuation, profitability and analyst recommendations.

Dividends

Sotherly Hotels pays an annual dividend of $0.44 per share and has a dividend yield of 6.6%. Ashford Hospitality Prime pays an annual dividend of $0.64 per share and has a dividend yield of 7.0%. Sotherly Hotels pays out -4,395.6% of its earnings in the form of a dividend. Ashford Hospitality Prime pays out -228.6% 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. Ashford Hospitality Prime has raised its dividend for 2 consecutive years. Ashford Hospitality Prime is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Sotherly Hotels and Ashford Hospitality Prime’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Sotherly Hotels 2.01% 3.98% 0.75%
Ashford Hospitality Prime -0.36% -0.43% -0.10%

Risk and Volatility

Sotherly Hotels has a beta of 0.71, indicating that its stock price is 29% less volatile than the S&P 500. Comparatively, Ashford Hospitality Prime has a beta of 1.18, indicating that its stock price is 18% more volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of current ratings for Sotherly Hotels and Ashford Hospitality Prime, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Sotherly Hotels 0 1 1 0 2.50
Ashford Hospitality Prime 0 3 4 0 2.57

Sotherly Hotels currently has a consensus target price of $8.00, indicating a potential upside of 19.23%. Ashford Hospitality Prime has a consensus target price of $13.40, indicating a potential upside of 45.97%. Given Ashford Hospitality Prime’s stronger consensus rating and higher possible upside, analysts clearly believe Ashford Hospitality Prime is more favorable than Sotherly Hotels.

Institutional and Insider Ownership

26.3% of Sotherly Hotels shares are held by institutional investors. Comparatively, 66.5% of Ashford Hospitality Prime shares are held by institutional investors. 13.8% of Sotherly Hotels shares are held by insiders. Comparatively, 10.0% of Ashford Hospitality Prime shares are held 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.

Earnings and Valuation

This table compares Sotherly Hotels and Ashford Hospitality Prime’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Sotherly Hotels $152.85 million 0.61 $920,000.00 ($0.01) -670.33
Ashford Hospitality Prime $405.86 million 0.72 $19.31 million ($0.28) -32.78

Ashford Hospitality Prime has higher revenue and earnings than Sotherly Hotels. Sotherly Hotels is trading at a lower price-to-earnings ratio than Ashford Hospitality Prime, indicating that it is currently the more affordable of the two stocks.

Summary

Ashford Hospitality Prime beats Sotherly Hotels on 10 of the 17 factors compared between the two stocks.

About Sotherly Hotels

Sotherly Hotels Inc. is a self-managed and self-administered lodging real estate investment trust. The Company is focused on the acquisition, renovation, upbranding and repositioning of upscale to upper-upscale full-service hotels in the southern United States. The Company operates through the hotel ownership segment. The Company conducts its operations through Sotherly Hotels LP, its Operating Partnership, of which the Company is the general partner. Its portfolio consists of approximately 10 full-service, mainly upscale and upper-upscale hotels located in over eight states with an aggregate of approximately 3,010 rooms and approximately 160,930 square feet of meeting space. All of these hotels are owned by subsidiaries of the Operating Partnership, approximately 10 operate under the Hilton, Crowne Plaza, DoubleTree and Sheraton brands, one is an independent hotel, and all are managed on a day to day basis by MHI Hotels Services, LLC, which does business as Chesapeake Hospitality.

About Ashford Hospitality Prime

Ashford Hospitality Prime, Inc. invests in high revenue per available room (RevPAR), luxury hotels and resorts. The Company conducts its business and owns all of its assets through its operating partnership, Ashford Hospitality Prime Limited Partnership (Ashford Prime OP). The Company operates in the direct hotel investment segment of the hotel lodging industry. As of February 24, 2017, it owned interests in 11 hotel properties in six states, the District of Columbia and St. Thomas, the United States Virgin Islands with 3,702 total rooms, or 3,467 net rooms, excluding those attributable to its joint venture partner. The hotel properties in its portfolio are mainly located in the Unites States urban markets. The Company owns nine of its hotel properties directly, and the remaining two hotel properties through an investment in a majority-owned consolidated entity. All of the hotels in the Company’s portfolio are asset-managed by Ashford Hospitality Advisors LLC.

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