HCP (NYSE:HCP) and AvalonBay Communities (NYSE:AVB) are both large-cap finance companies, but which is the better stock? We will compare the two businesses based on the strength of their analyst recommendations, dividends, institutional ownership, earnings, profitability, risk and valuation.

Risk and Volatility

HCP has a beta of 0.28, indicating that its share price is 72% less volatile than the S&P 500. Comparatively, AvalonBay Communities has a beta of 0.33, indicating that its share price is 67% less volatile than the S&P 500.

Earnings and Valuation

This table compares HCP and AvalonBay Communities’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
HCP $1.85 billion 6.52 $414.16 million $1.95 13.15
AvalonBay Communities $2.16 billion 11.38 $876.92 million $8.62 20.62

AvalonBay Communities has higher revenue and earnings than HCP. HCP is trading at a lower price-to-earnings ratio than AvalonBay Communities, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of recent recommendations for HCP and AvalonBay Communities, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
HCP 2 9 5 0 2.19
AvalonBay Communities 1 11 7 0 2.32

HCP currently has a consensus price target of $26.46, indicating a potential upside of 3.17%. AvalonBay Communities has a consensus price target of $192.41, indicating a potential upside of 8.26%. Given AvalonBay Communities’ stronger consensus rating and higher possible upside, analysts clearly believe AvalonBay Communities is more favorable than HCP.

Dividends

HCP pays an annual dividend of $1.48 per share and has a dividend yield of 5.8%. AvalonBay Communities pays an annual dividend of $5.88 per share and has a dividend yield of 3.3%. HCP pays out 75.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. AvalonBay Communities pays out 68.2% of its earnings in the form of a dividend. AvalonBay Communities has increased its dividend for 6 consecutive years.

Institutional and Insider Ownership

88.3% of HCP shares are held by institutional investors. Comparatively, 93.1% of AvalonBay Communities shares are held by institutional investors. 0.1% of HCP shares are held by company insiders. Comparatively, 0.4% of AvalonBay Communities shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Profitability

This table compares HCP and AvalonBay Communities’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
HCP 3.39% 1.12% 0.45%
AvalonBay Communities 39.01% 8.42% 4.72%

Summary

AvalonBay Communities beats HCP on 16 of the 17 factors compared between the two stocks.

About HCP

HCP, Inc. is a fully integrated real estate investment trust (REIT) that invests in real estate serving the healthcare industry in the United States. HCP owns a large-scale portfolio primarily diversified across life science, medical office and senior housing. Recognized as a global leader in sustainability, HCP has been a publicly-traded company since 1985 and was the first healthcare REIT selected to the S&P 500 index.

About AvalonBay Communities

As of June 30, 2018, the Company owned or held a direct or indirect ownership interest in 287 apartment communities containing 84,043 apartment homes in 12 states and the District of Columbia, of which 19 communities were under development and 16 communities were under redevelopment. The Company is an equity REIT in the business of developing, redeveloping, acquiring and managing apartment communities in leading metropolitan areas primarily in New England, the New York/New Jersey Metro area, the Mid-Atlantic, the Pacific Northwest, and the Northern and Southern California regions of the United States. As of June 30, 2018, the Company owned or held a direct or indirect ownership interest in 287 apartment communities containing 84,043 apartment homes in 12 states and the District of Columbia, of which 19 communities were under development and 16 communities were under redevelopment. The Company is an equity REIT in the business of developing, redeveloping, acquiring and managing apartment communities in leading metropolitan areas primarily in New England, the New York/New Jersey Metro area, the Mid-Atlantic, the Pacific Northwest, and the Northern and Southern California regions of the United States. More information may be found on the Company's website at http://www.avalonbay.com.

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