Reviewing Equity Residential (NYSE:EQR) and NexPoint Residential Trust (NXRT)

NexPoint Residential Trust (NYSE: NXRT) and Equity Residential (NYSE:EQR) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their analyst recommendations, institutional ownership, profitability, valuation, dividends, earnings and risk.

Profitability

This table compares NexPoint Residential Trust and Equity Residential’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
NexPoint Residential Trust 40.80% 24.54% 5.43%
Equity Residential 30.88% 7.22% 3.66%

Volatility and Risk

NexPoint Residential Trust has a beta of 0.93, suggesting that its stock price is 7% less volatile than the S&P 500. Comparatively, Equity Residential has a beta of 0.36, suggesting that its stock price is 64% less volatile than the S&P 500.

Institutional & Insider Ownership

56.6% of NexPoint Residential Trust shares are owned by institutional investors. Comparatively, 94.0% of Equity Residential shares are owned by institutional investors. 19.0% of NexPoint Residential Trust shares are owned by company insiders. Comparatively, 3.8% of Equity Residential shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Dividends

NexPoint Residential Trust pays an annual dividend of $1.00 per share and has a dividend yield of 3.7%. Equity Residential pays an annual dividend of $2.02 per share and has a dividend yield of 3.3%. NexPoint Residential Trust pays out 37.2% of its earnings in the form of a dividend. Equity Residential pays out 99.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Equity Residential has raised its dividend for 2 consecutive years. NexPoint Residential Trust is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares NexPoint Residential Trust and Equity Residential’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
NexPoint Residential Trust $132.85 million 4.26 $21.88 million $2.69 9.99
Equity Residential $2.43 billion 9.15 $4.29 billion $2.04 29.62

Equity Residential has higher revenue and earnings than NexPoint Residential Trust. NexPoint Residential Trust is trading at a lower price-to-earnings ratio than Equity Residential, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of recent ratings and price targets for NexPoint Residential Trust and Equity Residential, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
NexPoint Residential Trust 0 1 4 0 2.80
Equity Residential 1 8 4 0 2.23

NexPoint Residential Trust currently has a consensus price target of $27.67, indicating a potential upside of 3.00%. Equity Residential has a consensus price target of $68.85, indicating a potential upside of 13.95%. Given Equity Residential’s higher probable upside, analysts plainly believe Equity Residential is more favorable than NexPoint Residential Trust.

Summary

NexPoint Residential Trust beats Equity Residential on 9 of the 16 factors compared between the two stocks.

NexPoint Residential Trust Company Profile

NexPoint Residential Trust, Inc. is an externally managed real estate investment trust (REIT). The Company’s investment objectives are to maximize the cash flow and value of properties owned, acquire properties with cash flow growth potential, provide quarterly cash distributions and achieve long-term capital appreciation for its stockholders through targeted management and a value-add program. The Company is focused on multifamily investments primarily located in the Southeastern and Southwestern United States. All of the Company’s business operations are conducted through NexPoint Residential Trust Operating Partnership, L.P. (OP). The sole limited partner of the OP is the Company. Its subsidiary, NexPoint Residential Trust Operating Partnership GP, LLC, is the sole general partner of the OP. As of December 31, 2016, the Company owned 39 properties representing 12,965 units in eight states, including two Parked Assets. The Company’s advisor is NexPoint Real Estate Advisors, L.P.

Equity Residential Company Profile

Equity Residential is a real estate investment trust. The Company’s primary business is the acquisition, development and management of multifamily residential properties. Its segments include Boston, New York, Washington D.C., Southern California, San Francisco, Seattle and Other Markets. Southern California includes Los Angeles, San Diego and Orange County. Other Markets includes Phoenix. It is engaged in leasing of apartment units to residents. It focuses on rental apartment properties in urban and high-density suburban coastal gateway markets. As of December 31, 2016, the Company owned 302 properties located in 10 states and the District of Columbia consisting of 77,458 apartment units. The Company’s projects include The Alton, 455 Eye Street, 855 Brannan, Cascade, One Henry Adams, 340 Fremont and Vista 99. ERP Operating Limited Partnership (ERPOP) conducts the multifamily residential property business of Equity Residential.

Receive News & Ratings for NexPoint Residential Trust Daily - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings for NexPoint Residential Trust and related companies with MarketBeat.com's FREE daily email newsletter.

Leave a Reply