Comparing Duke Realty Corporation (DRE) and Extra Space Storage Inc. (EXR)

Duke Realty Corporation (NYSE:DRE) and Extra Space Storage Inc. (NYSE:EXR) are the two most active stocks in the REIT – Industrial industry based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.


Companies that can increase earnings at a high compound rate over time are attractive to investors. Analysts expect DRE to grow earnings at a 6.00% annual rate over the next 5 years. Comparatively, EXR is expected to grow at a 6.00% annual rate. All else equal, All else equal, the two stocks’ identical expected growth rates would imply a similar potential for capital appreciation..

Profitability and Returns

Growth in and of itself is not necessarily valuable, and it can even be harmful to shareholders if companies overinvest in unprofitable projects in pursuit of that growth. We will use EBITDA margin and Return on Investment (ROI), which adjust for differences in capital structure, as measure of profitability and return. Duke Realty Corporation (DRE) has an EBITDA margin of 91.72%, compared to an EBITDA margin of 60.09% for Extra Space Storage Inc. (EXR). This suggests that DRE underlying business is more profitable. DRE’s ROI is 6.90% while EXR has a ROI of 6.60%. The interpretation is that DRE’s business generates a higher return on investment than EXR’s.

Cash Flow 

The value of a stock is simply the present value of its future free cash flows. DRE’s free cash flow (“FCF”) per share for the trailing twelve months was +0.42. Comparatively, EXR’s free cash flow per share was +0.56. On a percent-of-sales basis, DRE’s free cash flow was 0.02% while EXR converted 0.01% of its revenues into cash flow. This means that, for a given level of sales, DRE is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Analysts look at liquidity and leverage ratios to assess how easily a company can cover its liabilities. DRE’s debt-to-equity ratio is 0.50 versus a D/E of 1.93 for EXR. EXR is therefore the more solvent of the two companies, and has lower financial risk.


DRE trades at a forward P/E of 84.03, a P/B of 2.27, and a P/S of 12.72, compared to a forward P/E of 26.53, a P/B of 4.42, and a P/S of 9.38 for EXR. DRE 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

Just because a stock is cheaper doesn’t mean there’s more value to be had. In order to assess value we need to compare the current price to where it’s likely to trade in the future. DRE is currently priced at a 0.1% to its one-year price target of $29.38. Comparatively, EXR is -3.76% relative to its price target of $81.13. This suggests that EXR 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 2.40 for DRE and 2.60 for EXR, which implies that analysts are more bullish on the outlook for EXR.

Risk and Volatility

Beta is an important measure that gives investors a sense of the market risk associated with a particular stock. A beta above 1 signals above average market risk, while a beta below 1 implies below average volatility. DRE has a beta of 0.92 and EXR’s beta is 0.38. EXR’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment

Short interest, or the percentage of a stock’s tradable shares currently being shorted, is another metric investors use to get a pulse on sentiment. DRE has a short ratio of 1.56 compared to a short interest of 11.54 for EXR. This implies that the market is currently less bearish on the outlook for DRE.


Duke Realty Corporation (NYSE:DRE) beats Extra Space Storage Inc. (NYSE:EXR) on a total of 7 of the 13 factors compared between the two stocks. DRE is more profitable, generates a higher return on investment, has a higher cash conversion rate and has lower financial risk. Finally, DRE has better sentiment signals based on short interest.

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