Critical Analysis: Elme Communities (NYSE:ELME) vs. Morningstar (NASDAQ:MORN)

Morningstar (NASDAQ:MORN) and Elme Communities (NYSE:ELME) are both finance companies, but which is the better business? We will compare the two businesses based on the strength of their risk, analyst recommendations, dividends, institutional ownership, profitability, valuation and earnings.

Profitability

This table compares Morningstar and Elme Communities’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Morningstar	16.43%	38.57%	12.22%
Elme Communities	-74.71%	-20.43%	-8.29%

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Morningstar and Elme Communities, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Morningstar	0	1	2	0	2.67
Elme Communities	1	3	0	0	1.75

Morningstar presently has a consensus price target of $227.33, suggesting a potential upside of 8.12%. Elme Communities has a consensus price target of $18.00, suggesting a potential upside of 968.25%. Given Elme Communities’ higher probable upside, analysts clearly believe Elme Communities is more favorable than Morningstar.

Dividends

Morningstar pays an annual dividend of $2.00 per share and has a dividend yield of 1.0%. Elme Communities pays an annual dividend of $0.18 per share and has a dividend yield of 10.7%. Morningstar pays out 18.9% of its earnings in the form of a dividend. Elme Communities pays out -11.8% 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. Morningstar has raised its dividend for 16 consecutive years. Elme Communities is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider and Institutional Ownership

57.0% of Morningstar shares are owned by institutional investors. Comparatively, 87.9% of Elme Communities shares are owned by institutional investors. 38.8% of Morningstar shares are owned by insiders. Comparatively, 1.4% of Elme Communities shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Volatility & Risk

Morningstar has a beta of 1, indicating that its share price has a similar volatility profile to the S&P 500.Comparatively, Elme Communities has a beta of 0.72, indicating that its share price is 28% less volatile than the S&P 500.

Valuation & Earnings

This table compares Morningstar and Elme Communities”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Morningstar	$2.45 billion	3.23	$374.20 million	$10.56	19.91
Elme Communities	$206.36 million	0.73	-$154.16 million	($1.52)	-1.11

Morningstar has higher revenue and earnings than Elme Communities. Elme Communities is trading at a lower price-to-earnings ratio than Morningstar, indicating that it is currently the more affordable of the two stocks.

Summary

Morningstar beats Elme Communities on 13 of the 17 factors compared between the two stocks.

About Morningstar

Morningstar, Inc. provides independent investment insights in the United States, Asia. Australia, Continental Europe, the United Kingdom, and internationally. The company operates in five segments: Morningstar Data and Analytics; PitchBook; Morningstar Wealth; Morningstar Credit; and Morningstar Retirement. The company offers managing investments, including mutual funds, ETFs, separate accounts, collective investment trusts, model portfolios, equities, and fixed income securities; Morningstar Direct is an investment-analysis and reporting platform; Morningstar Advisor Workstation, a suite of tool to provide help and advice. The PitchBook segment provides data and research covering the private capital markets comprising venture capital, private equity, private credit and bank loans, and merger and acquisition activities; and pitchbook platform. It provides model portfolios and wealth platforms; Morningstar Managed Portfolios, an advisor service with model portfolios designed for fee-based independent financial advisors; and Morningstar.com that discovers, evaluates, and monitors stocks, ETFs, and mutual funds; build and monitor portfolios and markets. In addition, the company provides credit ratings, research, data, and credit analytics solutions; Morningstar DBRS which offers securitizations and other structured finance instruments, such as asset-backed securities, residential mortgage-backed securities, commercial mortgage-backed securities, and collateralized loan obligations. Further, it offers managed retirement accounts, fiduciary services, Morningstar Lifetime Allocation funds, and custom models; Morningstar Indexes offers market indexes used for performance benchmarks and as the basis for investment products and other portfolio strategies; and Morningstar Sustainalytics provides environmental, social and governance data, research, analysis, and insights. Morningstar, Inc. was incorporated in 1984 and is headquartered in Chicago, Illinois.

About Elme Communities

Elme Communities is committed to elevating what home can be for middle-income renters by providing a higher level of quality, service, and experience. The Company is a multifamily real estate investment trust that owns and operates approximately 9,400 apartment homes in the Washington, DC metro and the Atlanta metro regions, and owns approximately 300,000 square feet of commercial space. Focused on providing quality, affordable homes to a deep, solid, and underserved base of mid-market demand, Elme Communities is building long-term value for shareholders.