Apollo Commercial Real Estate Finance (ARI) versus Hatteras Financial Corp. (HTS) Critical Survey

Apollo Commercial Real Estate Finance (NYSE: ARI) and Hatteras Financial Corp. (NYSE:HTS) are both small-cap mortgage reits companies, but which is the better business? We will contrast the two businesses based on the strength of their institutional ownership, analyst recommendations, dividends, earnings, profitability, risk and valuation.

Analyst Recommendations

This is a summary of recent ratings for Apollo Commercial Real Estate Finance and Hatteras Financial Corp., as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Apollo Commercial Real Estate Finance 0 3 1 0 2.25
Hatteras Financial Corp. 0 0 0 0 N/A

Apollo Commercial Real Estate Finance currently has a consensus price target of $18.50, indicating a potential upside of 0.82%. Given Apollo Commercial Real Estate Finance’s higher probable upside, equities research analysts plainly believe Apollo Commercial Real Estate Finance is more favorable than Hatteras Financial Corp..

Valuation & Earnings

This table compares Apollo Commercial Real Estate Finance and Hatteras Financial Corp.’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Apollo Commercial Real Estate Finance $200.62 million 9.80 $157.87 million $1.79 10.25
Hatteras Financial Corp. N/A N/A N/A ($0.09) -181.00

Apollo Commercial Real Estate Finance has higher revenue and earnings than Hatteras Financial Corp.. Hatteras Financial Corp. is trading at a lower price-to-earnings ratio than Apollo Commercial Real Estate Finance, indicating that it is currently the more affordable of the two stocks.

Dividends

Apollo Commercial Real Estate Finance pays an annual dividend of $1.84 per share and has a dividend yield of 10.0%. Hatteras Financial Corp. does not pay a dividend. Apollo Commercial Real Estate Finance pays out 102.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Apollo Commercial Real Estate Finance has increased its dividend for 2 consecutive years.

Profitability

This table compares Apollo Commercial Real Estate Finance and Hatteras Financial Corp.’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Apollo Commercial Real Estate Finance 86.07% 10.32% 5.57%
Hatteras Financial Corp. N/A -16.93% -1.89%

Insider & Institutional Ownership

65.5% of Apollo Commercial Real Estate Finance shares are owned by institutional investors. 0.6% of Apollo Commercial Real Estate Finance shares are owned 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.

Summary

Apollo Commercial Real Estate Finance beats Hatteras Financial Corp. on 11 of the 12 factors compared between the two stocks.

Apollo Commercial Real Estate Finance Company Profile

Apollo Commercial Real Estate Finance, Inc. is a real estate investment trust. The Company primarily originates, acquires, invests in and manages performing commercial first mortgage loans, subordinate financings, commercial mortgage-backed securities (CMBS) and other commercial real estate-related debt investments. The Company targets investments that are secured by institutional quality real estate. The Company’s principal business objective is to make investments in its target assets in order to provide attractive risk adjusted returns to its stockholders over the long term, primarily through dividends and secondarily through capital appreciation. The Company is externally managed and advised by ACREFI Management, LLC.

Hatteras Financial Corp. Company Profile

Hatteras Financial Corp. is an externally managed mortgage real estate investment trust (REIT) that invests in single-family residential mortgage real estate assets, such as mortgage-backed security (MBS), mortgage servicing right (MSR), residential mortgage loans and other financial assets. MBS are pass-through securities consisting of a pool of mortgage loans. Its primary business is owning and managing agency securities, with a primary focus on adjustable-rate mortgage securities. Its primary investment assets include Agency MBS; other agency issued securities, such as credit-risk transfer bonds; MSR; non-agency securities; residential mortgage loans, and other real estate related assets as permitted by its investment guidelines and REIT requirements. Its business operations consist of the Hatteras Financial Corp., Onslow Bay Financial LLC, First Winston Securities, Inc. and Wind River TRS LLC. It is externally managed and advised by its manager, Atlantic Capital Advisors LLC.

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