Retail Properties of America (RPAI) versus DiamondRock Hospitality (DRH) Critical Analysis

Retail Properties of America (NYSE:RPAI) and DiamondRock Hospitality (NYSE:DRH) are both mid-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their analyst recommendations, earnings, risk, dividends, profitability, institutional ownership and valuation.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Retail Properties of America and DiamondRock Hospitality, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Retail Properties of America 0 2 5 0 2.71
DiamondRock Hospitality 2 2 4 0 2.25

Retail Properties of America currently has a consensus price target of $15.07, suggesting a potential upside of 27.51%. DiamondRock Hospitality has a consensus price target of $12.04, suggesting a potential upside of 14.79%. Given Retail Properties of America’s stronger consensus rating and higher possible upside, analysts plainly believe Retail Properties of America is more favorable than DiamondRock Hospitality.

Volatility and Risk

Retail Properties of America has a beta of 0.25, suggesting that its share price is 75% less volatile than the S&P 500. Comparatively, DiamondRock Hospitality has a beta of 1.38, suggesting that its share price is 38% more volatile than the S&P 500.

Valuation & Earnings

This table compares Retail Properties of America and DiamondRock Hospitality’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Retail Properties of America $538.14 million 4.82 $251.49 million $1.06 11.15
DiamondRock Hospitality $870.01 million 2.51 $91.87 million $1.00 10.49

Retail Properties of America has higher earnings, but lower revenue than DiamondRock Hospitality. DiamondRock Hospitality is trading at a lower price-to-earnings ratio than Retail Properties of America, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Retail Properties of America and DiamondRock Hospitality’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Retail Properties of America 39.61% 10.31% 5.15%
DiamondRock Hospitality 9.26% 4.26% 2.53%

Insider & Institutional Ownership

82.0% of Retail Properties of America shares are owned by institutional investors. 0.5% of Retail Properties of America shares are owned by insiders. Comparatively, 1.1% of DiamondRock Hospitality shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Dividends

Retail Properties of America pays an annual dividend of $0.66 per share and has a dividend yield of 5.6%. DiamondRock Hospitality pays an annual dividend of $0.50 per share and has a dividend yield of 4.8%. Retail Properties of America pays out 62.3% of its earnings in the form of a dividend. DiamondRock Hospitality pays out 50.0% 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.

Summary

Retail Properties of America beats DiamondRock Hospitality on 12 of the 16 factors compared between the two stocks.

Retail Properties of America Company Profile

Retail Properties of America, Inc. is a REIT that owns and operates high quality, strategically located open-air shopping centers, including properties with a mixed-use component. As of June 30, 2018, the Company owned 105 retail operating properties in the United States representing 19.5 million square feet. The Company is publicly traded on the New York Stock Exchange under the ticker symbol RPAI.

DiamondRock Hospitality Company Profile

DiamondRock Hospitality Company is a self-advised real estate investment trust (REIT) that is an owner of a leading portfolio of geographically diversified hotels concentrated in top gateway markets and destination resort locations. The Company owns 30 premium quality hotels with over 9,900 rooms. The Company has strategically positioned its hotels to be operated both under leading global brand families such as Hilton and Marriott as well as unique boutique hotels in the lifestyle segment.

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