Associated Estates Realty (NYSE: AEC) and Preferred Apartment Communities (NYSE:APTS) are both small-cap residential reits companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, dividends, institutional ownership, earnings, analyst recommendations, risk and valuation.

Earnings and Valuation

This table compares Associated Estates Realty and Preferred Apartment Communities’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Associated Estates Realty N/A N/A N/A $1.20 23.96
Preferred Apartment Communities $200.12 million 3.79 -$9.53 million ($1.01) -20.47

Associated Estates Realty has higher earnings, but lower revenue than Preferred Apartment Communities. Preferred Apartment Communities is trading at a lower price-to-earnings ratio than Associated Estates Realty, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Associated Estates Realty and Preferred Apartment Communities, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Associated Estates Realty 0 0 0 0 N/A
Preferred Apartment Communities 0 2 2 0 2.50

Preferred Apartment Communities has a consensus target price of $19.75, indicating a potential downside of 4.45%. Given Preferred Apartment Communities’ higher possible upside, analysts plainly believe Preferred Apartment Communities is more favorable than Associated Estates Realty.

Profitability

This table compares Associated Estates Realty and Preferred Apartment Communities’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Associated Estates Realty 60.04% 18.10% 7.71%
Preferred Apartment Communities 10.49% 2.78% 1.08%

Insider and Institutional Ownership

52.5% of Preferred Apartment Communities shares are owned by institutional investors. 3.1% of Preferred Apartment Communities shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Dividends

Preferred Apartment Communities pays an annual dividend of $0.94 per share and has a dividend yield of 4.5%. Associated Estates Realty does not pay a dividend. Preferred Apartment Communities pays out -93.1% of its earnings in the form of a dividend. Associated Estates Realty has raised its dividend for 5 consecutive years.

Summary

Preferred Apartment Communities beats Associated Estates Realty on 7 of the 12 factors compared between the two stocks.

About Associated Estates Realty

Associated Estates Realty Corporation is a self-administered and self-managed equity real estate investment trust (REIT). The Company is engaged primarily in the ownership and operation of multifamily apartment units. It specializes in multifamily ownership, operation, acquisition, development, disposition and property management activities. Its operating portfolio consists of approximately 49 apartment communities containing around 12,734 units in eight states that are owned, either directly or indirectly, through its subsidiaries. It also owns a commercial building in Los Angeles, California containing approximately 78,800 total square feet of office and commercial space. The Company also earns revenue from rental payments from the leasing of apartment units. It owns a taxable REIT subsidiary, which performs construction management services in connection with the development of multifamily properties that it owns, including consolidated and unconsolidated joint ventures.

About Preferred Apartment Communities

Preferred Apartment Communities, Inc. is a real estate investment trust (REIT). The Company is formed to acquire and operate multifamily properties in select targeted markets throughout the United States. It operates through segments, including multifamily communities, real estate related financing, new market properties and office buildings. The multifamily communities segment consists of its portfolio of owned residential multifamily communities. The real estate related financing segment consists of the Company’s portfolio of real estate loans, bridge loans, and other instruments deployed by it to partially finance the development, construction, and prestabilization carrying costs of new multifamily communities and other real estate and real estate related assets. The new market properties segment consists of its portfolio of grocery-anchored shopping centers. The office buildings segment consists of its office buildings located in Atlanta, Georgia and Birmingham, Alabama and Texas.

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