Financial Review: Preferred Apartment Communities (APTS) & ARMOUR Residential REIT (ARR)

Preferred Apartment Communities (NASDAQ: APTS) and ARMOUR Residential REIT (NYSE:ARR) are both small-cap financials companies, but which is the better business? We will contrast the two companies based on the strength of their dividends, analyst recommendations, earnings, institutional ownership, profitability, valuation and risk.

Valuation and Earnings

This table compares Preferred Apartment Communities and ARMOUR Residential REIT’s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	EBITDA	Earnings Per Share	Price/Earnings Ratio
Preferred Apartment Communities	$249.98 million	2.42	$142.18 million	N/A	N/A
ARMOUR Residential REIT	$331.03 million	3.28	$313.42 million	$7.60	3.46

ARMOUR Residential REIT has higher revenue and earnings than Preferred Apartment Communities.

Profitability

This table compares Preferred Apartment Communities and ARMOUR Residential REIT’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Preferred Apartment Communities	4.66%	-4.73%	0.51%
ARMOUR Residential REIT	114.11%	9.26%	1.31%

Dividends

ARMOUR Residential REIT pays an annual dividend of $2.28 per share and has a dividend yield of 8.7%. Preferred Apartment Communities does not pay a dividend. ARMOUR Residential REIT pays out 30.0% of its earnings in the form of a dividend. ARMOUR Residential REIT has increased its dividend for 2 consecutive years.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Preferred Apartment Communities and ARMOUR Residential REIT, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Preferred Apartment Communities	0	1	3	0	2.75
ARMOUR Residential REIT	1	1	0	0	1.50

Preferred Apartment Communities currently has a consensus price target of $17.63, suggesting a potential downside of 3.11%. ARMOUR Residential REIT has a consensus price target of $23.00, suggesting a potential downside of 12.65%. Given Preferred Apartment Communities’ stronger consensus rating and higher probable upside, equities analysts plainly believe Preferred Apartment Communities is more favorable than ARMOUR Residential REIT.

Institutional & Insider Ownership

42.8% of ARMOUR Residential REIT shares are held by institutional investors. 1.5% of ARMOUR Residential REIT shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Summary

ARMOUR Residential REIT beats Preferred Apartment Communities on 10 of the 14 factors compared between the two stocks.

Preferred Apartment Communities Company Profile

Preferred Apartment Communities, Inc. is a real estate investment trust (REIT). The Company is formed to acquire and operate multifamily properties in select targeted markets throughout the United States. It operates through segments, including multifamily communities, real estate related financing, new market properties and office buildings. The multifamily communities segment consists of its portfolio of owned residential multifamily communities. The real estate related financing segment consists of the Company’s portfolio of real estate loans, bridge loans, and other instruments deployed by it to partially finance the development, construction, and prestabilization carrying costs of new multifamily communities and other real estate and real estate related assets. The new market properties segment consists of its portfolio of grocery-anchored shopping centers. The office buildings segment consists of its three office buildings located in Atlanta, Georgia and Birmingham, Alabama.

ARMOUR Residential REIT Company Profile

ARMOUR Residential REIT, Inc. is a real estate investment trust. The Company invests in and manages a leveraged portfolio of mortgage-backed securities (MBS) and mortgage loans. The Company invests in residential mortgage backed securities issued or guaranteed by a United States Government-sponsored enterprise (GSE), such as the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation, or a government agency, such as the Government National Mortgage Association (collectively, Agency Securities). The Company also invests in Interest-Only Securities, which are the interest portions of Agency Securities that are separated and sold individually from the principal portion of the same payment. The Company raises funds for additional funding through equity offerings (including preferred equity), unsecured debt securities and convertible securities (including warrants, preferred equity and debt), among others. It is managed by ARMOUR Capital Management LP.