Ares Commercial Real Estate (NYSE:ACRE – Get Free Report) and Ready Capital (NYSE:RC – Get Free Report) are both small-cap finance companies, but which is the better stock? We will compare the two businesses based on the strength of their risk, dividends, institutional ownership, earnings, valuation, profitability and analyst recommendations.
Institutional & Insider Ownership
41.3% of Ares Commercial Real Estate shares are held by institutional investors. Comparatively, 55.9% of Ready Capital shares are held by institutional investors. 2.8% of Ares Commercial Real Estate shares are held by company insiders. Comparatively, 1.1% of Ready Capital shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.
Valuation and Earnings
This table compares Ares Commercial Real Estate and Ready Capital”s gross revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Ares Commercial Real Estate | -$15.23 million | -17.74 | -$34.99 million | ($0.65) | -7.58 |
| Ready Capital | $27.35 million | 31.89 | $339.45 million | ($2.64) | -2.03 |
Analyst Recommendations
This is a summary of recent recommendations and price targets for Ares Commercial Real Estate and Ready Capital, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Ares Commercial Real Estate | 1 | 5 | 0 | 0 | 1.83 |
| Ready Capital | 1 | 7 | 1 | 0 | 2.00 |
Ares Commercial Real Estate currently has a consensus target price of $5.81, indicating a potential upside of 18.02%. Ready Capital has a consensus target price of $7.86, indicating a potential upside of 46.94%. Given Ready Capital’s stronger consensus rating and higher probable upside, analysts clearly believe Ready Capital is more favorable than Ares Commercial Real Estate.
Profitability
This table compares Ares Commercial Real Estate and Ready Capital’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Ares Commercial Real Estate | -50.24% | -8.64% | -2.51% |
| Ready Capital | -11.65% | 7.53% | 1.49% |
Dividends
Ares Commercial Real Estate pays an annual dividend of $0.60 per share and has a dividend yield of 12.2%. Ready Capital pays an annual dividend of $0.50 per share and has a dividend yield of 9.4%. Ares Commercial Real Estate pays out -92.3% of its earnings in the form of a dividend. Ready Capital pays out -18.9% 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. Ares Commercial Real Estate is clearly the better dividend stock, given its higher yield and lower payout ratio.
Risk & Volatility
Ares Commercial Real Estate has a beta of 1.57, meaning that its share price is 57% more volatile than the S&P 500. Comparatively, Ready Capital has a beta of 1.43, meaning that its share price is 43% more volatile than the S&P 500.
Summary
Ready Capital beats Ares Commercial Real Estate on 10 of the 16 factors compared between the two stocks.
About Ares Commercial Real Estate
Ares Commercial Real Estate Corporation, a specialty finance company, originates and invests in commercial real estate (CRE) loans and related investments in the United States. It provides a range of financing solutions for the owners, operators, and sponsors of CRE properties. The company originates senior mortgage loans, subordinate debt and preferred equity products, mezzanine loans, and other CRE investments, including commercial mortgage-backed securities. It 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 Corporation was incorporated in 2011 and is based in New York, New York.
About Ready Capital
Ready Capital Corporation operates as a real estate finance company in the United States. It operates through two segments: LMM Commercial Real Estate and Small Business Lending. The company originates, acquires, finances, and services lower-to-middle-market (LLM) commercial real estate loans, small business administration (SBA) loans, residential mortgage loans, construction loans, and mortgage-backed securities collateralized primarily by LLM loans, or other real estate-related investments. The LMM Commercial Real Estate segment originates LLM loans across the full life-cycle of an LLM property, including construction, bridge, stabilized, and agency loan origination channels. The Small Business Lending segment acquires, originates, and services owner-occupied loans guaranteed by the SBA under its SBA Section 7(a) Program; and acquires purchased future receivables. The company has elected to be taxed as a real estate investment trust (REIT) 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 formerly known as Sutherland Asset Management Corporation and changed its name to Ready Capital Corporation in September 2018. Ready Capital Corporation was founded in 2007 and is headquartered in New York, New York.
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