DiamondRock Hospitality (NYSE:DRH) and Easterly Government Properties (NYSE:DEA) are both small-cap finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their valuation, dividends, earnings, risk, profitability, analyst recommendations and institutional ownership.

Profitability

This table compares DiamondRock Hospitality and Easterly Government Properties’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
DiamondRock Hospitality 10.44% 4.90% 2.89%
Easterly Government Properties 2.15% 0.35% 0.21%

Earnings & Valuation

This table compares DiamondRock Hospitality and Easterly Government Properties’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
DiamondRock Hospitality $863.70 million 2.35 $87.78 million $1.02 9.86
Easterly Government Properties $160.59 million 7.81 $5.70 million $1.17 15.76

DiamondRock Hospitality has higher revenue and earnings than Easterly Government Properties. DiamondRock Hospitality is trading at a lower price-to-earnings ratio than Easterly Government Properties, indicating that it is currently the more affordable of the two stocks.

Dividends

DiamondRock Hospitality pays an annual dividend of $0.50 per share and has a dividend yield of 5.0%. Easterly Government Properties pays an annual dividend of $1.04 per share and has a dividend yield of 5.6%. DiamondRock Hospitality pays out 49.0% of its earnings in the form of a dividend. Easterly Government Properties pays out 88.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Easterly Government Properties has increased its dividend for 3 consecutive years. Easterly Government Properties is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

DiamondRock Hospitality has a beta of 1.42, suggesting that its share price is 42% more volatile than the S&P 500. Comparatively, Easterly Government Properties has a beta of 0.68, suggesting that its share price is 32% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for DiamondRock Hospitality and Easterly Government Properties, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
DiamondRock Hospitality 4 4 0 0 1.50
Easterly Government Properties 0 1 3 0 2.75

DiamondRock Hospitality presently has a consensus price target of $10.00, indicating a potential downside of 0.60%. Easterly Government Properties has a consensus price target of $21.00, indicating a potential upside of 13.88%. Given Easterly Government Properties’ stronger consensus rating and higher possible upside, analysts clearly believe Easterly Government Properties is more favorable than DiamondRock Hospitality.

Insider and Institutional Ownership

93.1% of Easterly Government Properties shares are owned by institutional investors. 0.9% of DiamondRock Hospitality shares are owned by company insiders. Comparatively, 12.1% of Easterly Government Properties shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Summary

Easterly Government Properties beats DiamondRock Hospitality on 10 of the 17 factors compared between the two stocks.

About DiamondRock Hospitality

DiamondRock Hospitality Company is a self-advised real estate investment trust (REIT) that is an owner of a leading portfolio of geographically diversified hotels concentrated in top gateway markets and destination resort locations. The Company owns 31 premium quality hotels with over 10,000 rooms. The Company has strategically positioned its hotels to be operated both under leading global brand families such as Hilton and Marriott as well as unique boutique hotels in the lifestyle segment.

About Easterly Government Properties

Easterly Government Properties, Inc. (NYSE:DEA) is based in Washington, D.C., and focuses primarily on the acquisition, development and management of Class A commercial properties that are leased to the U.S. Government. Easterly's experienced management team brings specialized insight into the strategy and needs of mission-critical U.S. Government agencies for properties leased to such agencies either directly or through the U.S. General Services Administration (GSA).

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