Analyzing Altisource Residential Corporation (RESI) and Colony Starwood Homes (SFR)

Colony Starwood Homes (NYSE: SFR) and Altisource Residential Corporation (NYSE:RESI) are both finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their analyst recommendations, dividends, earnings, profitability, institutional ownership, valuation and risk.

Risk & Volatility

Colony Starwood Homes has a beta of 0.89, suggesting that its stock price is 11% less volatile than the S&P 500. Comparatively, Altisource Residential Corporation has a beta of 1.96, suggesting that its stock price is 96% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Colony Starwood Homes and Altisource Residential Corporation, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Colony Starwood Homes 0 5 6 0 2.55
Altisource Residential Corporation 0 4 4 0 2.50

Colony Starwood Homes presently has a consensus target price of $36.90, suggesting a potential downside of 3.66%. Altisource Residential Corporation has a consensus target price of $15.57, suggesting a potential upside of 42.33%. Given Altisource Residential Corporation’s higher probable upside, analysts clearly believe Altisource Residential Corporation is more favorable than Colony Starwood Homes.

Insider and Institutional Ownership

73.5% of Altisource Residential Corporation shares are held by institutional investors. 5.0% of Colony Starwood Homes shares are held by insiders. Comparatively, 0.5% of Altisource Residential Corporation shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Profitability

This table compares Colony Starwood Homes and Altisource Residential Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Colony Starwood Homes -7.41% -1.11% -0.48%
Altisource Residential Corporation -266.58% -21.64% -8.15%

Valuation & Earnings

This table compares Colony Starwood Homes and Altisource Residential Corporation’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Colony Starwood Homes $575.68 million 8.54 -$81.26 million ($0.40) -95.75
Altisource Residential Corporation $56.76 million 10.30 -$228.02 million ($3.90) -2.81

Colony Starwood Homes has higher revenue and earnings than Altisource Residential Corporation. Colony Starwood Homes is trading at a lower price-to-earnings ratio than Altisource Residential Corporation, indicating that it is currently the more affordable of the two stocks.

Dividends

Colony Starwood Homes pays an annual dividend of $0.88 per share and has a dividend yield of 2.3%. Altisource Residential Corporation pays an annual dividend of $0.60 per share and has a dividend yield of 5.5%. Colony Starwood Homes pays out -220.0% of its earnings in the form of a dividend. Altisource Residential Corporation pays out -15.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Altisource Residential Corporation has raised its dividend for 3 consecutive years. Altisource Residential Corporation is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Colony Starwood Homes beats Altisource Residential Corporation on 10 of the 16 factors compared between the two stocks.

Colony Starwood Homes Company Profile

Starwood Waypoint Homes, formerly Colony Starwood Homes, is an internally managed real estate investment trust (REIT). The Company was formed primarily to acquire, renovate, lease and manage residential assets in select markets across the United States. It is focused on acquiring single-family rental (SFR) homes through a variety of channels, renovating these homes to the extent necessary and leasing them to qualified residents. The Company operates through two segments, which are represented by its portfolio of SFR homes and its portfolio of NPLs owned in the joint venture with Prime Asset Fund VI, LLC (Prime). The Company identifies and pursues individual home acquisition opportunities through various sources, including multiple listing services (MLS) listings, foreclosure auctions and short sales. As of December 31, 2016, its SFR portfolio consisted of 31,684 owned homes, including 31,065 rental homes and 619 homes that it does not intend to hold for the long term.

Altisource Residential Corporation Company Profile

Altisource Residential Corporation is a real estate investment trust (REIT). The Company focuses on acquiring, owning and managing single-family rental (SFR) properties throughout the United States. The Company conducts its activities through its subsidiary, Altisource Residential, L.P., and its subsidiaries. The Company also converts a portion of the real estate owned (REO) properties that it acquires through resolution of its mortgage loans into SFR properties. The Company has also entered into property management service agreements with two third-party property managers: Altisource Portfolio Solutions, SA (ASPS) and Main Street Renewal, LLC (MSR), to provide, among other things, leasing and lease management, operations, maintenance, repair and property management services in respect of its SFR portfolios. As of December 31, 2016, the Company had 10,533 properties, consisting of 9,939 properties held for use and 594 held for sale.

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