Arbor Realty Trust (NYSE: ABR) and iStar Financial (NYSE:STAR) are both small-cap finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their risk, earnings, dividends, analyst recommendations, institutional ownership, valuation and profitability.

Profitability

This table compares Arbor Realty Trust and iStar Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Arbor Realty Trust 57.54% 11.61% 2.77%
iStar Financial 24.13% 19.57% 3.97%

Dividends

Arbor Realty Trust pays an annual dividend of $0.72 per share and has a dividend yield of 8.4%. iStar Financial does not pay a dividend. Arbor Realty Trust pays out 61.5% of its earnings in the form of a dividend. Arbor Realty Trust has increased its dividend for 5 consecutive years.

Risk and Volatility

Arbor Realty Trust has a beta of 0.61, indicating that its share price is 39% less volatile than the S&P 500. Comparatively, iStar Financial has a beta of 1.29, indicating that its share price is 29% more volatile than the S&P 500.

Institutional and Insider Ownership

47.8% of Arbor Realty Trust shares are owned by institutional investors. Comparatively, 88.9% of iStar Financial shares are owned by institutional investors. 16.5% of Arbor Realty Trust shares are owned by company insiders. Comparatively, 4.4% of iStar Financial shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Analyst Ratings

This is a breakdown of current ratings and price targets for Arbor Realty Trust and iStar Financial, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Arbor Realty Trust 0 1 1 0 2.50
iStar Financial 0 2 0 0 2.00

Arbor Realty Trust currently has a consensus target price of $8.88, indicating a potential upside of 3.68%. iStar Financial has a consensus target price of $14.00, indicating a potential upside of 23.89%. Given iStar Financial’s higher possible upside, analysts clearly believe iStar Financial is more favorable than Arbor Realty Trust.

Earnings and Valuation

This table compares Arbor Realty Trust and iStar Financial’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Arbor Realty Trust $116.17 million 4.55 $50.34 million $1.17 7.32
iStar Financial $477.03 million 1.62 $95.30 million ($0.53) -21.32

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

Summary

Arbor Realty Trust beats iStar Financial on 9 of the 17 factors compared between the two stocks.

About Arbor Realty Trust

Arbor Realty Trust, Inc. is a real estate investment trust. The Company invests in a portfolio of structured finance assets in the multifamily and commercial real estate markets, primarily consisting of bridge and mezzanine loans, including junior participating interests in first mortgages, preferred and direct equity. Its segments include Structured Business and Agency Business. In addition, the Company may also directly acquire real property and invest in real estate-related notes and certain mortgage-related securities. It focuses on investment types, such as Bridge Financing, Mezzanine Financing, Junior Participation Financing and Preferred Equity Investments. It offers bridge financing products to borrowers, typically seeking short-term capital to use in an acquisition of property. It offers mezzanine financing in the form of loans that are subordinate to a conventional first mortgage loan and senior to the borrower’s equity in a transaction.

About iStar Financial

iStar Inc. finances, invests in and develops real estate and real estate related projects as part of its integrated investment platform. The Company’s four business segments are Real Estate Finance, Net Lease, Operating Properties, and Land and Development. The Real Estate Finance portfolio consists of senior and mezzanine real estate loans that may be either fixed-rate or variable-rate. The Net Lease portfolio consists of properties owned by the Company and leased to single tenants, where the properties are subject to long-term leases. The Operating Properties portfolio consists of commercial and residential properties, which represent a pool of assets across a range of geographies and property types. The Land and Development portfolio consists of land entitled for master planned communities, as well as waterfront and urban infill land parcels located throughout the United States. Its Land and Development projects include Great Oaks, Sage Scottsdale, Naples Reserve and Coney Island.

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