Adamas Trust (NASDAQ:ADAM – Get Free Report) and Ares Commercial Real Estate (NYSE:ACRE – Get Free Report) are both small-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their institutional ownership, valuation, risk, earnings, dividends, profitability and analyst recommendations.
Institutional and Insider Ownership
54.9% of Adamas Trust shares are owned by institutional investors. Comparatively, 41.3% of Ares Commercial Real Estate shares are owned by institutional investors. 2.0% of Adamas Trust shares are owned by company insiders. Comparatively, 2.3% of Ares Commercial Real Estate shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.
Dividends
Adamas Trust pays an annual dividend of $1.08 per share and has a dividend yield of 10.6%. Ares Commercial Real Estate pays an annual dividend of $0.60 per share and has a dividend yield of 12.8%. Adamas Trust pays out 64.3% of its earnings in the form of a dividend. Ares Commercial Real Estate pays out -750.0% 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. Ares Commercial Real Estate is clearly the better dividend stock, given its higher yield and lower payout ratio.
Earnings & Valuation
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Adamas Trust | $407.04 million | 2.24 | $149.05 million | $1.68 | 6.04 |
| Ares Commercial Real Estate | $54.83 million | 4.76 | -$900,000.00 | ($0.08) | -58.75 |
Adamas Trust has higher revenue and earnings than Ares Commercial Real Estate. Ares Commercial Real Estate is trading at a lower price-to-earnings ratio than Adamas Trust, indicating that it is currently the more affordable of the two stocks.
Analyst Recommendations
This is a breakdown of recent recommendations and price targets for Adamas Trust and Ares Commercial Real Estate, as reported by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Adamas Trust | 0 | 3 | 1 | 1 | 2.60 |
| Ares Commercial Real Estate | 2 | 4 | 1 | 0 | 1.86 |
Adamas Trust presently has a consensus price target of $9.50, indicating a potential downside of 6.40%. Ares Commercial Real Estate has a consensus price target of $5.25, indicating a potential upside of 11.70%. Given Ares Commercial Real Estate’s higher possible upside, analysts plainly believe Ares Commercial Real Estate is more favorable than Adamas Trust.
Profitability
This table compares Adamas Trust and Ares Commercial Real Estate’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Adamas Trust | 29.82% | 14.72% | 1.04% |
| Ares Commercial Real Estate | -8.04% | 4.08% | 1.23% |
Volatility and Risk
Adamas Trust has a beta of 1.17, indicating that its stock price is 17% more volatile than the S&P 500. Comparatively, Ares Commercial Real Estate has a beta of 1.15, indicating that its stock price is 15% more volatile than the S&P 500.
Summary
Adamas Trust beats Ares Commercial Real Estate on 10 of the 16 factors compared between the two stocks.
About Adamas Trust
New York Mortgage Trust, Inc. acquires, invests in, finances, and manages mortgage-related single-family and multi-family residential assets in the United States. Its targeted investments include residential loans, second mortgages, and business purpose loans; structured multi-family property investments, such as preferred equity in, and mezzanine loans to owners of multi-family properties, as well as joint venture equity investments in multi-family properties; non-agency residential mortgage-backed securities (RMBS); agency RMBS; commercial mortgage-backed securities (CMBS); and other mortgage, residential housing, and credit-related assets. The company qualifies as a real estate investment trust for federal income tax purposes. It generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. The company was incorporated in 2003 and is headquartered in New York, New York.
About Ares Commercial Real Estate
Ares Commercial Real Estate Corporation, a specialty finance company, originates and invests in commercial real estate (CRE) loans and related investments in the United States. It provides a range of financing solutions for the owners, operators, and sponsors of CRE properties. The company originates senior mortgage loans, subordinate debt and preferred equity products, mezzanine loans, and other CRE investments, including commercial mortgage-backed securities. It has elected and qualified to be taxed as a real estate investment trust for the United States federal income tax purposes under the Internal Revenue Code of 1986. Ares Commercial Real Estate Corporation was incorporated in 2011 and is based in New York, New York.
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