Reviewing Ares Commercial Real Estate (NYSE:ACRE) and Prologis (NYSE:PLD)

Ares Commercial Real Estate (NYSE:ACRE) and Prologis (NYSE:PLD) are both finance companies, but which is the superior business? We will compare the two companies based on the strength of their analyst recommendations, profitability, valuation, institutional ownership, earnings, dividends and risk.

Analyst Recommendations

This is a summary of recent ratings and price targets for Ares Commercial Real Estate and Prologis, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Ares Commercial Real Estate 0 2 1 1 2.75
Prologis 0 3 10 1 2.86



Ares Commercial Real Estate currently has a consensus price target of $14.67, indicating a potential downside of 3.89%. Prologis has a consensus price target of $77.54, indicating a potential downside of 5.23%. Given Ares Commercial Real Estate’s higher possible upside, research analysts clearly believe Ares Commercial Real Estate is more favorable than Prologis.

Risk & Volatility

Ares Commercial Real Estate has a beta of 0.59, suggesting that its share price is 41% less volatile than the S&P 500. Comparatively, Prologis has a beta of 1.03, suggesting that its share price is 3% more volatile than the S&P 500.

Valuation and Earnings

This table compares Ares Commercial Real Estate and Prologis’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Ares Commercial Real Estate $118.28 million 3.72 $38.60 million $1.39 10.98
Prologis $2.80 billion 18.41 $1.65 billion $3.03 27.00

Prologis has higher revenue and earnings than Ares Commercial Real Estate. Ares Commercial Real Estate is trading at a lower price-to-earnings ratio than Prologis, indicating that it is currently the more affordable of the two stocks.

Dividends

Ares Commercial Real Estate pays an annual dividend of $1.32 per share and has a dividend yield of 8.7%. Prologis pays an annual dividend of $2.12 per share and has a dividend yield of 2.6%. Ares Commercial Real Estate pays out 95.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Prologis pays out 70.0% of its earnings in the form of a dividend. Ares Commercial Real Estate has raised its dividend for 3 consecutive years and Prologis has raised its dividend for 5 consecutive years.

Profitability

This table compares Ares Commercial Real Estate and Prologis’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Ares Commercial Real Estate 32.10% 9.29% 2.38%
Prologis 55.04% 6.55% 4.37%

Institutional & Insider Ownership

67.9% of Ares Commercial Real Estate shares are held by institutional investors. Comparatively, 95.4% of Prologis shares are held by institutional investors. 2.2% of Ares Commercial Real Estate shares are held by company insiders. Comparatively, 1.1% of Prologis shares are held 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

Prologis beats Ares Commercial Real Estate on 13 of the 17 factors compared between the two stocks.

Ares Commercial Real Estate Company Profile

Ares Commercial Real Estate Corporation, a specialty finance company, originates and invests in commercial real estate loans and related investments in the United States. It provides a range of financing solutions for the owners, operators, and sponsors of commercial real estate (CRE) properties. The company originates senior mortgage loans, subordinate debt products, real estate preferred equity investments, mezzanine loans, and other CRE investments. Ares Commercial Real Estate Corporation 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 Management LLC operates as the manager of the company. The company was founded in 2011 and is headquartered in New York, New York.

Prologis Company Profile

Prologis, Inc. is the global leader in logistics real estate with a focus on high-barrier, high-growth markets. As of December 31, 2018, the company owned or had investments in, on a wholly owned basis or through co-investment ventures, properties and development projects expected to total approximately 768 million square feet (71 million square meters) in 19 countries. Prologis leases modern distribution facilities to a diverse base of approximately 5,100 customers across two major categories: business-to-business and retail/online fulfillment.

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