Ladder Capital Corp (NYSE:LADR) shares are down more than -0.22% this year and recently increased 0.29% or $0.04 to settle at $13.69. New Senior Investment Group Inc. (NYSE:SNR), on the other hand, is down -21.45% year to date as of 12/11/2017. It currently trades at $7.69 and has returned -6.10% during the past week.
Ladder Capital Corp (NYSE:LADR) and New Senior Investment Group Inc. (NYSE:SNR) are the two most active stocks in the REIT – Diversified industry based on today’s trading volumes. We will compare the two companies based on the strength of various metrics, including growth, profitability, risk, return, and valuation to determine if one is a better investment than the other.
One of the key things investors look for in a company is the ability to grow earnings at a high compound rate over time. Analysts expect LADR to grow earnings at a 5.00% annual rate over the next 5 years.
Profitability and Returns
A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use EBITDA margin and Return on Investment (ROI) to measure this., compared to an EBITDA margin of 49.04% for New Senior Investment Group Inc. (SNR). LADR’s ROI is 2.30% while SNR has a ROI of -3.10%. The interpretation is that LADR’s business generates a higher return on investment than SNR’s.
Cash is king when it comes to investing. On a percent-of-sales basis, LADR’s free cash flow was 0% while SNR converted -0% of its revenues into cash flow. This means that, for a given level of sales, LADR is able to generate more free cash flow for investors.
Liquidity and Financial Risk
LADR’s debt-to-equity ratio is 3.73 versus a D/E of 4.23 for SNR. SNR is therefore the more solvent of the two companies, and has lower financial risk.
LADR trades at a forward P/E of 9.07, a P/B of 1.04, and a P/S of 3.46, compared to a P/B of 1.28, and a P/S of 1.42 for SNR. LADR is the cheaper of the two stocks on book value basis but is expensive in terms of P/E and P/S ratio. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.
Analyst Price Targets and Opinions
A cheap stock isn’t a good investment if the stock is priced accurately. To get a sense of “value” we must compare the current price to some measure of intrinsic value such as a price target. LADR is currently priced at a -11.22% to its one-year price target of 15.42. Comparatively, SNR is -17.58% relative to its price target of 9.33. This suggests that SNR is the better investment over the next year.
The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.20 for LADR and 3.30 for SNR, which implies that analysts are more bullish on the outlook for SNR.
Insider Activity and Investor Sentiment
The analysis of insider buying and selling trends can be extended to the aggregate level. Short interest, which represents the percentage of a stock’s tradable shares currently being shorted, captures what the market as a whole feels about a stock. LADR has a short ratio of 1.03 compared to a short interest of 4.10 for SNR. This implies that the market is currently less bearish on the outlook for LADR.
Ladder Capital Corp (NYSE:LADR) beats New Senior Investment Group Inc. (NYSE:SNR) on a total of 8 of the 14 factors compared between the two stocks. LADR is growing fastly, is more profitable, generates a higher return on investment, has higher cash flow per share and has lower financial risk. Finally, LADR has better sentiment signals based on short interest.