Critical Review: KKR Real Estate Finance Trust (NYSE:KREF) and TPG RE Finance Trust (NYSE:TRTX)

TPG RE Finance Trust (NYSE:TRTX) and KKR Real Estate Finance Trust (NYSE:KREF) are both small-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their earnings, valuation, profitability, institutional ownership, analyst recommendations, dividends and risk.

Institutional & Insider Ownership

57.1% of TPG RE Finance Trust shares are owned by institutional investors. Comparatively, 70.2% of KKR Real Estate Finance Trust shares are owned by institutional investors. 3.0% of TPG RE Finance Trust shares are owned by company insiders. Comparatively, 2.1% of KKR Real Estate Finance Trust shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Risk & Volatility

TPG RE Finance Trust has a beta of 1.42, meaning that its share price is 42% more volatile than the S&P 500. Comparatively, KKR Real Estate Finance Trust has a beta of 0.83, meaning that its share price is 17% less volatile than the S&P 500.

Profitability

This table compares TPG RE Finance Trust and KKR Real Estate Finance Trust’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
TPG RE Finance Trust	17.03%	6.85%	1.66%
KKR Real Estate Finance Trust	-47.33%	-1.53%	-0.27%

Dividends

TPG RE Finance Trust pays an annual dividend of $0.96 per share and has a dividend yield of 14.5%. KKR Real Estate Finance Trust pays an annual dividend of $0.40 per share and has a dividend yield of 6.4%. TPG RE Finance Trust pays out 177.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. KKR Real Estate Finance Trust pays out -12.2% of its earnings in the form of a dividend.

Analyst Recommendations

This is a summary of current ratings for TPG RE Finance Trust and KKR Real Estate Finance Trust, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
TPG RE Finance Trust	0	3	4	0	2.57
KKR Real Estate Finance Trust	2	5	1	1	2.11

TPG RE Finance Trust currently has a consensus target price of $10.00, indicating a potential upside of 51.17%. KKR Real Estate Finance Trust has a consensus target price of $8.92, indicating a potential upside of 42.48%. Given TPG RE Finance Trust’s stronger consensus rating and higher possible upside, equities research analysts plainly believe TPG RE Finance Trust is more favorable than KKR Real Estate Finance Trust.

Earnings & Valuation

This table compares TPG RE Finance Trust and KKR Real Estate Finance Trust”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
TPG RE Finance Trust	$332.58 million	1.53	$60.32 million	$0.54	12.25
KKR Real Estate Finance Trust	$435.60 million	0.84	-$47.05 million	($3.28)	-1.91

TPG RE Finance Trust has higher earnings, but lower revenue than KKR Real Estate Finance Trust. KKR Real Estate Finance Trust is trading at a lower price-to-earnings ratio than TPG RE Finance Trust, indicating that it is currently the more affordable of the two stocks.

Summary

TPG RE Finance Trust beats KKR Real Estate Finance Trust on 13 of the 17 factors compared between the two stocks.

About TPG RE Finance Trust

TPG RE Finance Trust, Inc., a commercial real estate finance company, originates, acquires, and manages commercial mortgage loans and other commercial real estate-related debt instruments in the United States. It invests in commercial mortgage loans; subordinate mortgage interests, mezzanine loans, secured real estate securities, note financing, preferred equity, and miscellaneous debt instruments; and commercial real estate collateralized loan obligations and commercial mortgage-backed securities secured by properties primarily in the multifamily, life science, mixed-use, hospitality, self storage, industrial, and retail real estate sectors. The company qualifies as a real estate investment trust for federal income tax purposes. It generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. TPG RE Finance Trust, Inc. was incorporated in 2014 and is based in New York, New York.

About KKR Real Estate Finance Trust

KKR Real Estate Finance Trust Inc., a mortgage real estate investment trust, focuses primarily on originating and acquiring transitional senior loans secured by commercial real estate (CRE) assets. It engages in the origination and purchase of credit investments related to CRE, including leveraged and unleveraged commercial real estate loans. The company has elected to be taxed as a real estate investment trust and would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. KKR Real Estate Finance Trust Inc. was incorporated in 2014 and is headquartered in New York, New York.