Critical Comparison: The RMR Group (RMR) and Alexander & Baldwin (ALEX)

The RMR Group (NASDAQ: RMR) and Alexander & Baldwin (NYSE:ALEX) are both small-cap finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their institutional ownership, profitability, dividends, earnings, analyst recommendations, valuation and risk.

Valuation & Earnings

This table compares The RMR Group and Alexander & Baldwin’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
The RMR Group $266.94 million 3.33 $37.24 million $2.78 21.21
Alexander & Baldwin $387.50 million 3.79 -$10.20 million $0.37 80.65

The RMR Group has higher earnings, but lower revenue than Alexander & Baldwin. The RMR Group is trading at a lower price-to-earnings ratio than Alexander & Baldwin, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares The RMR Group and Alexander & Baldwin’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
The RMR Group 16.44% 10.14% 7.43%
Alexander & Baldwin 4.15% 3.89% 2.18%

Risk & Volatility

The RMR Group has a beta of -0.71, indicating that its share price is 171% less volatile than the S&P 500. Comparatively, Alexander & Baldwin has a beta of 1.45, indicating that its share price is 45% more volatile than the S&P 500.

Insider & Institutional Ownership

34.5% of The RMR Group shares are held by institutional investors. Comparatively, 77.9% of Alexander & Baldwin shares are held by institutional investors. 55.3% of The RMR Group shares are held by insiders. Comparatively, 7.6% of Alexander & Baldwin shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Dividends

The RMR Group pays an annual dividend of $1.00 per share and has a dividend yield of 1.7%. Alexander & Baldwin pays an annual dividend of $0.28 per share and has a dividend yield of 0.9%. The RMR Group pays out 36.0% of its earnings in the form of a dividend. Alexander & Baldwin pays out 75.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Alexander & Baldwin has increased its dividend for 3 consecutive years. The RMR Group is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a summary of recent recommendations for The RMR Group and Alexander & Baldwin, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
The RMR Group 0 3 2 0 2.40
Alexander & Baldwin 0 0 1 0 3.00

The RMR Group presently has a consensus target price of $59.50, indicating a potential upside of 0.93%. Alexander & Baldwin has a consensus target price of $50.00, indicating a potential upside of 67.56%. Given Alexander & Baldwin’s stronger consensus rating and higher possible upside, analysts clearly believe Alexander & Baldwin is more favorable than The RMR Group.

Summary

The RMR Group beats Alexander & Baldwin on 10 of the 17 factors compared between the two stocks.

The RMR Group Company Profile

The RMR Group Inc. is a holding company. The Company’s business is primarily conducted by its subsidiary, The RMR Group LLC (RMR LLC). The Company’s segments include RMR LLC and All Other Operations. RMR LLC manages a portfolio of publicly owned real estate and real estate related businesses. RMR LLC manages Government Properties Income Trust, a real estate investment trust (REIT) that primarily owns properties that are leased to government tenants; Hospitality Properties Trust, an REIT that primarily owns hotels and travel centers; Select Income REIT, an REIT that primarily owns properties leased to single tenants across the United States and leased lands in Hawaii, and Senior Housing Properties Trust, an REIT that primarily owns senior living communities and medical office buildings. As of June 30, 2016, RMR LLC managed over 1,300 properties, which were located in 48 states, Washington, District of Columbia, Puerto Rico and Canada.

Alexander & Baldwin Company Profile

Alexander & Baldwin, Inc. (A&B) is a real estate company. The Company operates through three segments: Commercial Real Estate, Land Operations, and Materials and Construction. In addition to its 15 retail centers in Hawaii, the Company owned seven industrial assets, seven office properties and a portfolio of urban ground leases comprising 106 acres in Hawaii, as of December 31, 2016. On the United States mainland, the Company owned seven remaining commercial assets, as of December 31, 2016. The Commercial Real Estate segment owns, operates and manages retail, industrial and office properties in Hawaii and on the Mainland. The Land Operations segment manages the Company’s land and real estate-related assets and deploys these assets to their use. The Materials and Construction segment performs asphalt paving as prime contractor and subcontractor; imports and sells liquid asphalt; mines, processes and sells basalt aggregate, and produces and sells asphaltic and ready-mix concrete.

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