Analyzing Colony Capital (CLNY) and Altisource Residential (RESI)

Colony Capital (NYSE: CLNY) and Altisource Residential (NYSE:RESI) are both financials companies, but which is the superior investment? We will contrast the two companies based on the strength of their earnings, dividends, profitability, institutional ownership, analyst recommendations, risk and valuation.

Profitability

This table compares Colony Capital and Altisource Residential’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Colony Capital 31.43% 3.16% 2.88%
Altisource Residential -266.58% -21.64% -8.15%

Dividends

Colony Capital pays an annual dividend of $1.60 per share and has a dividend yield of 7.4%. Altisource Residential pays an annual dividend of $0.60 per share and has a dividend yield of 5.5%. Colony Capital pays out 192.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Altisource Residential pays out -15.4% of its earnings in the form of a dividend. Colony Capital has raised its dividend for 7 consecutive years and Altisource Residential has raised its dividend for 3 consecutive years. Colony Capital is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation & Earnings

This table compares Colony Capital and Altisource Residential’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Colony Capital N/A N/A N/A $0.83 25.93
Altisource Residential $56.76 million 10.21 -$228.02 million ($3.90) -2.78

Colony Capital has higher earnings, but lower revenue than Altisource Residential. Altisource Residential is trading at a lower price-to-earnings ratio than Colony Capital, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

94.1% of Colony Capital shares are held by institutional investors. Comparatively, 70.5% of Altisource Residential shares are held by institutional investors. 17.7% of Colony Capital shares are held by company insiders. Comparatively, 0.5% of Altisource Residential shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Colony Capital and Altisource Residential, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Colony Capital 0 1 1 0 2.50
Altisource Residential 0 2 4 0 2.67

Colony Capital presently has a consensus price target of $27.50, suggesting a potential upside of 27.79%. Altisource Residential has a consensus price target of $15.67, suggesting a potential upside of 44.53%. Given Altisource Residential’s stronger consensus rating and higher probable upside, analysts clearly believe Altisource Residential is more favorable than Colony Capital.

Summary

Colony Capital beats Altisource Residential on 8 of the 13 factors compared between the two stocks.

Colony Capital Company Profile

Colony Capital, Inc., formerly Colony Financial, Inc., is a global real estate and investment management company. The Company operates through five segments: Real Estate Equity, including Light industrial real estate assets and operating platform; Single-family residential rentals through an investment in Colony Starwood Homes and Other real estate equity investments; Real Estate Debt, which includes loan originations and acquisitions, and Investment Management, which includes investment management of the Company-sponsored funds and other investment vehicles. Through its global investment management business, it has over $18.8 billion of assets under management. Its business objective is to provide risk-adjusted returns to its investors through a diversified portfolio of direct and indirect real estate-related equity and real estate debt investments, and fee bearing management contracts on investment funds that it manages.

Altisource Residential Company Profile

Altisource Residential Corporation is a real estate investment trust (REIT). The Company focuses on acquiring, owning and managing single-family rental (SFR) properties throughout the United States. The Company conducts its activities through its subsidiary, Altisource Residential, L.P., and its subsidiaries. The Company also converts a portion of the real estate owned (REO) properties that it acquires through resolution of its mortgage loans into SFR properties. The Company has also entered into property management service agreements with two third-party property managers: Altisource Portfolio Solutions, SA (ASPS) and Main Street Renewal, LLC (MSR), to provide, among other things, leasing and lease management, operations, maintenance, repair and property management services in respect of its SFR portfolios. As of December 31, 2016, the Company had 10,533 properties, consisting of 9,939 properties held for use and 594 held for sale.

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