Head to Head Analysis: Lexington Realty Trust (LXP) & RAIT Financial Trust (RAS)

Lexington Realty Trust (NYSE: LXP) and RAIT Financial Trust (NYSE:RAS) are both financials companies, but which is the superior investment? We will contrast the two companies based on the strength of their risk, valuation, profitability, analyst recommendations, dividends, earnings and institutional ownership.

Institutional & Insider Ownership

74.0% of Lexington Realty Trust shares are owned by institutional investors. Comparatively, 51.8% of RAIT Financial Trust shares are owned by institutional investors. 3.1% of Lexington Realty Trust shares are owned by insiders. Comparatively, 1.3% of RAIT Financial Trust shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Valuation and Earnings

This table compares Lexington Realty Trust and RAIT Financial Trust’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Lexington Realty Trust $429.50 million 5.59 $95.62 million $0.29 34.38
RAIT Financial Trust $173.61 million 0.17 $25.34 million ($1.80) -0.18

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

Profitability

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

Net Margins Return on Equity Return on Assets
Lexington Realty Trust 17.96% 5.29% 2.00%
RAIT Financial Trust -45.47% -50.11% -3.25%

Dividends

Lexington Realty Trust pays an annual dividend of $0.70 per share and has a dividend yield of 7.0%. RAIT Financial Trust pays an annual dividend of $0.20 per share and has a dividend yield of 63.4%. Lexington Realty Trust pays out 241.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. RAIT Financial Trust pays out -11.1% of its earnings in the form of a dividend. Lexington Realty Trust has raised its dividend for 6 consecutive years. RAIT Financial Trust is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a summary of current ratings and price targets for Lexington Realty Trust and RAIT Financial Trust, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Lexington Realty Trust 1 6 0 0 1.86
RAIT Financial Trust 1 3 0 0 1.75

Lexington Realty Trust presently has a consensus price target of $10.55, indicating a potential upside of 5.82%. RAIT Financial Trust has a consensus price target of $1.43, indicating a potential upside of 351.66%. Given RAIT Financial Trust’s higher probable upside, analysts clearly believe RAIT Financial Trust is more favorable than Lexington Realty Trust.

Risk & Volatility

Lexington Realty Trust has a beta of 0.96, meaning that its share price is 4% less volatile than the S&P 500. Comparatively, RAIT Financial Trust has a beta of 1.51, meaning that its share price is 51% more volatile than the S&P 500.

Summary

Lexington Realty Trust beats RAIT Financial Trust on 11 of the 15 factors compared between the two stocks.

Lexington Realty Trust Company Profile

Lexington Realty Trust is a real estate investment trust (REIT). The Company owns a portfolio of equity and debt investments in single-tenant commercial properties. As of December 31, 2016, the Company had equity ownership interests in approximately 195 consolidated real estate properties, located in 40 states and containing an aggregate of approximately 43.3 million square feet of space, approximately 96.0% of which was leased. The Company conducts its operations either directly or indirectly through property owner subsidiaries and lender subsidiaries, which are single purpose entities; an operating partnership, Lepercq Corporate Income Fund L.P. (LCIF), in which the Company is the sole unit holder of the general partner and the sole unit holder of the limited partner that holds a majority of the limited partner interests; Lexington Realty Advisors, Inc. (LRA), a subsidiary of the Company, and investments in joint ventures.

RAIT Financial Trust Company Profile

RAIT Financial Trust (RAIT) is a real estate investment trust (REIT). The Company focuses on providing commercial real estate (CRE) financing throughout the United States. The core of its business is a full service CRE lending platform focused on first lien loans. It offers customized lending solutions to meet borrower needs and internal credit goals. It offers personalized middle-market financing solutions and a complement of lending products for CRE. The Company may also offer mezzanine loans and preferred equity interests in limited circumstances to support first lien loans. It is engaged in floating rate securitization programs and has access to multiple sources of funding, including senior debt, convertible securities, preferred securities and common securities. The Company also owns and manages a portfolio of CRE properties, and manages real estate assets for third parties. The Company is engaged in lending, owning and managing CRE assets throughout the United States.

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