Analyzing RLJ Lodging Trust (RLJ) and Sunstone Hotel Investors (SHO)

RLJ Lodging Trust (NYSE: RLJ) and Sunstone Hotel Investors (NYSE:SHO) are both mid-cap financials companies, but which is the superior stock? We will contrast the two companies based on the strength of their profitability, earnings, valuation, institutional ownership, analyst recommendations, dividends and risk.

Institutional and Insider Ownership

98.2% of RLJ Lodging Trust shares are held by institutional investors. 2.3% of RLJ Lodging Trust shares are held by insiders. Comparatively, 0.8% of Sunstone Hotel Investors shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Valuation & Earnings

This table compares RLJ Lodging Trust and Sunstone Hotel Investors’ top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
RLJ Lodging Trust $1.16 billion 3.29 $200.35 million $0.76 28.72
Sunstone Hotel Investors $1.19 billion 2.94 $145.37 million $0.60 25.97

RLJ Lodging Trust has higher earnings, but lower revenue than Sunstone Hotel Investors. Sunstone Hotel Investors is trading at a lower price-to-earnings ratio than RLJ Lodging Trust, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of recent ratings for RLJ Lodging Trust and Sunstone Hotel Investors, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
RLJ Lodging Trust 1 5 5 0 2.36
Sunstone Hotel Investors 3 8 1 0 1.83

RLJ Lodging Trust presently has a consensus price target of $23.45, suggesting a potential upside of 7.44%. Sunstone Hotel Investors has a consensus price target of $15.94, suggesting a potential upside of 2.29%. Given RLJ Lodging Trust’s stronger consensus rating and higher probable upside, equities analysts plainly believe RLJ Lodging Trust is more favorable than Sunstone Hotel Investors.

Volatility & Risk

RLJ Lodging Trust has a beta of 1.1, meaning that its share price is 10% more volatile than the S&P 500. Comparatively, Sunstone Hotel Investors has a beta of 1.05, meaning that its share price is 5% more volatile than the S&P 500.

Profitability

This table compares RLJ Lodging Trust and Sunstone Hotel Investors’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
RLJ Lodging Trust 12.30% 5.80% 3.04%
Sunstone Hotel Investors 7.13% 2.67% 2.15%

Dividends

RLJ Lodging Trust pays an annual dividend of $1.32 per share and has a dividend yield of 6.0%. Sunstone Hotel Investors pays an annual dividend of $2.32 per share and has a dividend yield of 14.9%. RLJ Lodging Trust pays out 173.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Sunstone Hotel Investors pays out 386.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. RLJ Lodging Trust has increased its dividend for 7 consecutive years.

Summary

RLJ Lodging Trust beats Sunstone Hotel Investors on 15 of the 17 factors compared between the two stocks.

RLJ Lodging Trust Company Profile

RLJ Lodging Trust is a self-administered real estate investment trust. The Company is engaged in the acquisition of focused-service and compact full-service hotels. As of December 31, 2016, the Company owned 122 hotels with approximately 20,100 rooms, located in 21 states and the District of Columbia, and an interest in one mortgage loan secured by a hotel. Its hotels’ brand affiliations include Residence Inn, Courtyard, SpringHill Suites, Fairfield Inn & Suites, Marriott, Renaissance, Hilton Garden Inn, Hampton Inn/Hampton Inn & Suites, Embassy Suites, DoubleTree, Homewood Suites, Hilton, Hyatt House, Hyatt Place and Hyatt/Hyatt Centric. Its operating partnership is RLJ Lodging Trust, L.P. Its properties include Courtyard San Francisco, Courtyard Boulder Longmont, Residence Inn Longmont Boulder, DoubleTree Grand Key Resort, Courtyard Atlanta Buckhead, Courtyard Chicago Southeast Hammond, Courtyard Louisville Northeast, DoubleTree Hotel Columbia and Residence Inn Detroit Novi.

Sunstone Hotel Investors Company Profile

Sunstone Hotel Investors, Inc. operates as a self-managed and self-administered real estate investment trust (REIT). The Company’s primary business is to acquire, own, asset manage and renovate primarily urban and resort upper upscale hotels in the United States. The Company operates through hotel ownership segment. The Company owns primarily urban and resort upper upscale hotels in the United States. The Company’s hotels are operated under nationally recognized brands, such as Marriott, Hilton and Hyatt. As of January 10, 2018, the Company had interest in 25 hotels, including 12,450 rooms. The Company’s hotels are located in gateway markets, such as Boston, New York, Washington, District of Columbia (DC)/Baltimore, Chicago, Orlando, New Orleans, San Francisco, Los Angeles, Orange County and San Diego.

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