Ares Commercial Real Estate (NYSE:ACRE – Get Free Report) and Invesco Mortgage Capital (NYSE:IVR – Get Free Report) are both small-cap finance companies, but which is the better stock? We will contrast the two companies based on the strength of their profitability, institutional ownership, valuation, earnings, dividends, analyst recommendations and risk.
Earnings and Valuation
This table compares Ares Commercial Real Estate and Invesco Mortgage Capital”s gross revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Ares Commercial Real Estate | $54.83 million | 4.90 | -$900,000.00 | ($0.02) | -242.75 |
| Invesco Mortgage Capital | $119.84 million | 5.65 | $101.28 million | $1.28 | 6.36 |
Dividends
Ares Commercial Real Estate pays an annual dividend of $0.60 per share and has a dividend yield of 12.4%. Invesco Mortgage Capital pays an annual dividend of $0.48 per share and has a dividend yield of 5.9%. Ares Commercial Real Estate pays out -3,000.0% of its earnings in the form of a dividend. Invesco Mortgage Capital pays out 37.5% 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.
Analyst Ratings
This is a summary of current ratings for Ares Commercial Real Estate and Invesco Mortgage Capital, as provided by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Ares Commercial Real Estate | 2 | 3 | 1 | 0 | 1.83 |
| Invesco Mortgage Capital | 0 | 3 | 1 | 0 | 2.25 |
Ares Commercial Real Estate presently has a consensus price target of $5.33, indicating a potential upside of 9.85%. Invesco Mortgage Capital has a consensus price target of $8.25, indicating a potential upside of 1.41%. Given Ares Commercial Real Estate’s higher possible upside, equities analysts clearly believe Ares Commercial Real Estate is more favorable than Invesco Mortgage Capital.
Volatility & Risk
Ares Commercial Real Estate has a beta of 1.23, suggesting that its share price is 23% more volatile than the S&P 500. Comparatively, Invesco Mortgage Capital has a beta of 1.76, suggesting that its share price is 76% more volatile than the S&P 500.
Profitability
This table compares Ares Commercial Real Estate and Invesco Mortgage Capital’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Ares Commercial Real Estate | -1.64% | -1.99% | -0.70% |
| Invesco Mortgage Capital | 34.30% | 28.85% | 2.84% |
Insider and Institutional Ownership
41.3% of Ares Commercial Real Estate shares are held by institutional investors. Comparatively, 40.5% of Invesco Mortgage Capital shares are held by institutional investors. 1.8% of Ares Commercial Real Estate shares are held by company insiders. Comparatively, 0.2% of Invesco Mortgage Capital shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.
Summary
Invesco Mortgage Capital beats Ares Commercial Real Estate on 10 of the 15 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 Invesco Mortgage Capital
Invesco Mortgage Capital Inc. operates as a real estate investment trust (REIT) that invests, finances, and manages mortgage-backed securities and other mortgage-related assets in the United States. It invests in residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS) that are guaranteed by a U.S. government agency or federally chartered corporation; RMBS and CMBS that are not issued or guaranteed by the United States government agency or federally chartered corporation; the United States treasury securities; real estate-related financing arrangements; to-be-announced securities forward contracts to purchase RMBS; and commercial mortgage loans. It has elected to be taxed as a REIT and would be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. The company was incorporated in 2008 and is headquartered in Atlanta, Georgia.
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