Critical Review: VEREIT (VER) versus PS Business Parks (PSB)
VEREIT (NYSE: VER) and PS Business Parks (NYSE:PSB) are both mid-cap finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their analyst recommendations, profitability, institutional ownership, risk, dividends, valuation and earnings.
Institutional and Insider Ownership
86.0% of VEREIT shares are owned by institutional investors. Comparatively, 72.3% of PS Business Parks shares are owned by institutional investors. 0.1% of VEREIT shares are owned by company insiders. Comparatively, 1.6% of PS Business Parks shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.
This table compares VEREIT and PS Business Parks’ net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|PS Business Parks||39.05%||16.50%||7.61%|
Earnings and Valuation
This table compares VEREIT and PS Business Parks’ revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|VEREIT||$1.40 billion||5.90||$1.12 billion||($0.11)||-77.08|
|PS Business Parks||$394.93 million||9.37||$261.16 million||$3.06||44.43|
VEREIT has higher revenue and earnings than PS Business Parks. VEREIT is trading at a lower price-to-earnings ratio than PS Business Parks, indicating that it is currently the more affordable of the two stocks.
This is a breakdown of current ratings and price targets for VEREIT and PS Business Parks, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|PS Business Parks||1||1||0||0||1.50|
VEREIT presently has a consensus price target of $9.88, suggesting a potential upside of 16.45%. PS Business Parks has a consensus price target of $107.00, suggesting a potential downside of 21.31%. Given VEREIT’s stronger consensus rating and higher probable upside, analysts plainly believe VEREIT is more favorable than PS Business Parks.
VEREIT pays an annual dividend of $0.55 per share and has a dividend yield of 6.5%. PS Business Parks pays an annual dividend of $3.40 per share and has a dividend yield of 2.5%. VEREIT pays out -500.0% of its earnings in the form of a dividend. PS Business Parks pays out 111.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. PS Business Parks has increased its dividend for 3 consecutive years. VEREIT is clearly the better dividend stock, given its higher yield and lower payout ratio.
Risk & Volatility
VEREIT has a beta of 0.72, suggesting that its stock price is 28% less volatile than the S&P 500. Comparatively, PS Business Parks has a beta of 0.6, suggesting that its stock price is 40% less volatile than the S&P 500.
VEREIT beats PS Business Parks on 9 of the 16 factors compared between the two stocks.
VEREIT, Inc. is a full-service real estate operating company. The Company operates through two business segments: real estate investment (REI) segment and investment management segment, Cole Capital. As of December 31, 2016, through its REI segment, the Company owned and managed a portfolio of 4,142 retail, restaurant, office and industrial real estate properties with an aggregate of 93.3 million square feet, which are located in 49 states, Puerto Rico and Canada. Through its Cole Capital segment, the Company is responsible for raising capital for and managing the affairs of certain non-listed real estate investment trusts (the Cole REITs) on a day-to-day basis, identifying and making acquisitions and investments on the Cole REITs’ behalf. The Cole Capital segment sponsors and manages direct investment real estate programs, which primarily include over four publicly registered, non-traded REITs.
About PS Business Parks
PS Business Parks, Inc. is a self-advised and self-managed real estate investment trust (REIT). The Company owns, operates and develops commercial properties, primarily multi-tenant flex, office and industrial parks. It focuses on owning concentrated business parks. PS Business Parks, L.P. (the Operating Partnership) is a California limited partnership, which owns directly or indirectly substantially all of its assets and through, which the Company conducts substantially all of its business. PSB is the partner of the Operating Partnership and, as of December 31, 2016, owned 77.9% of the common partnership units. The remaining common partnership units are owned by Public Storage (PS). As of December 31, 2016, the Company owned and operated 28.1 million rentable square feet of commercial space, comprising 99 business parks, in the states, including California, Texas, Virginia, Florida, Maryland and Washington. It also manages 684,000 rentable square feet on behalf of PS.
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