Seritage Growth Properties (NYSE: SRG) and STORE Capital Corporation (NYSE:STOR) are both finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their profitabiliy, analyst recommendations, earnings, valuation, institutional ownership, risk and dividends.

Volatility and Risk

Seritage Growth Properties has a beta of 1.18, suggesting that its share price is 18% more volatile than the S&P 500. Comparatively, STORE Capital Corporation has a beta of 0.25, suggesting that its share price is 75% less volatile than the S&P 500.

Dividends

Seritage Growth Properties pays an annual dividend of $1.00 per share and has a dividend yield of 2.1%. STORE Capital Corporation pays an annual dividend of $1.16 per share and has a dividend yield of 4.9%. Seritage Growth Properties pays out -42.2% of its earnings in the form of a dividend. STORE Capital Corporation pays out 118.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Profitability

This table compares Seritage Growth Properties and STORE Capital Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Seritage Growth Properties -31.23% -5.52% -2.83%
STORE Capital Corporation 38.71% 5.98% 3.10%

Earnings and Valuation

This table compares Seritage Growth Properties and STORE Capital Corporation’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Seritage Growth Properties $248.20 million 6.43 $163.67 million ($2.37) -19.85
STORE Capital Corporation $421.32 million 9.69 $381.86 million $0.98 24.35

STORE Capital Corporation has higher revenue and earnings than Seritage Growth Properties. Seritage Growth Properties is trading at a lower price-to-earnings ratio than STORE Capital Corporation, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

86.3% of Seritage Growth Properties shares are held by institutional investors. Comparatively, 92.7% of STORE Capital Corporation shares are held by institutional investors. 9.8% of Seritage Growth Properties shares are held by insiders. Comparatively, 0.9% of STORE Capital Corporation shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Analyst Ratings

This is a summary of current recommendations and price targets for Seritage Growth Properties and STORE Capital Corporation, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Seritage Growth Properties 1 1 1 0 2.00
STORE Capital Corporation 1 4 7 0 2.50

Seritage Growth Properties presently has a consensus target price of $43.00, suggesting a potential downside of 8.59%. STORE Capital Corporation has a consensus target price of $27.05, suggesting a potential upside of 13.37%. Given STORE Capital Corporation’s stronger consensus rating and higher probable upside, analysts clearly believe STORE Capital Corporation is more favorable than Seritage Growth Properties.

Summary

STORE Capital Corporation beats Seritage Growth Properties on 12 of the 16 factors compared between the two stocks.

About Seritage Growth Properties

Seritage Growth Properties (Seritage) is a self-administered and self-managed real estate investment trust. The Company is engaged in the acquisition, ownership, development, redevelopment, management and leasing of diversified retail real estate throughout the United States. Its assets are held by and its operations are primarily conducted through, directly or indirectly, Seritage Growth Properties, L.P. (Operating Partnership). As of December 31, 2016, the Company’s portfolio included approximately 42.2 million square feet of gross leasable area (GLA), consisting of 235 owned properties totaling over 36.8 million square feet of GLA across 49 states and Puerto Rico, and interests in 31 joint venture properties totaling over 5.4 million square feet of GLA across 17 states. As of December 31, 2016, it included over 3,000 acres of land or approximately 13 acres per site for its owned properties. Its properties are primarily located in areas, including in California, Florida and Texas.

About STORE Capital Corporation

STORE Capital Corporation is an internally managed net-lease real estate investment trust. The Company is engaged in the acquisition, investment and management of single tenant operational real estate (STORE) properties. As of December 31, 2016, the Company owned a portfolio that consisted of investments in 1,660 property locations operated by 360 customers across 48 states. Its customers operate across a range of industries within the service, retail and manufacturing sectors of the United States economy, with restaurants, early childhood education centers, movie theaters, health clubs and furniture stores. The Company’s portfolio includes investments in approximately 1,330 property locations operated by over 300 customers across approximately 50 states. The Company provides real estate financing solutions principally to businesses that own STORE properties and operate within the broad-based service, retail and industrial sectors of the United States economy.

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