Northstar Realty Europe (NRE) vs. TIER REIT (TIER) Financial Review

Northstar Realty Europe (NYSE: NRE) and TIER REIT (NYSE:TIER) are both small-cap finance companies, but which is the better stock? We will compare the two businesses based on the strength of their profitability, analyst recommendations, dividends, valuation, risk, institutional ownership and earnings.

Analyst Recommendations

This is a summary of current recommendations and price targets for Northstar Realty Europe and TIER REIT, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Northstar Realty Europe 0 0 3 0 3.00
TIER REIT 0 0 3 0 3.00

Northstar Realty Europe currently has a consensus price target of $16.83, indicating a potential upside of 33.07%. TIER REIT has a consensus price target of $21.00, indicating a potential upside of 7.53%. Given Northstar Realty Europe’s higher probable upside, equities research analysts plainly believe Northstar Realty Europe is more favorable than TIER REIT.

Institutional & Insider Ownership

70.8% of Northstar Realty Europe shares are held by institutional investors. Comparatively, 57.5% of TIER REIT shares are held by institutional investors. 2.2% of Northstar Realty Europe shares are held by insiders. Comparatively, 1.2% of TIER REIT shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Risk & Volatility

Northstar Realty Europe has a beta of 2.54, indicating that its share price is 154% more volatile than the S&P 500. Comparatively, TIER REIT has a beta of 0.94, indicating that its share price is 6% less volatile than the S&P 500.

Dividends

Northstar Realty Europe pays an annual dividend of $0.60 per share and has a dividend yield of 4.7%. TIER REIT pays an annual dividend of $0.72 per share and has a dividend yield of 3.7%. Northstar Realty Europe pays out -171.4% of its earnings in the form of a dividend. TIER REIT pays out 39.6% 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. TIER REIT has raised its dividend for 2 consecutive years. Northstar Realty Europe is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Northstar Realty Europe and TIER REIT’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Northstar Realty Europe -14.48% 7.68% 2.43%
TIER REIT 40.68% 12.86% 5.60%

Earnings and Valuation

This table compares Northstar Realty Europe and TIER REIT’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Northstar Realty Europe $151.21 million 4.63 -$61.75 million ($0.35) -36.14
TIER REIT $242.82 million 3.85 -$29.41 million $1.82 10.73

TIER REIT has higher revenue and earnings than Northstar Realty Europe. Northstar Realty Europe is trading at a lower price-to-earnings ratio than TIER REIT, indicating that it is currently the more affordable of the two stocks.

About Northstar Realty Europe

NorthStar Realty Europe Corp. is a real estate investment trust (REIT). The Company is a European focused commercial real estate company with primary office properties in cities within Germany, the United Kingdom and France. Its objective is to provide its stockholders with stable and recurring cash flow supplemented by capital growth over time. The Company conducts its business through two segments: Real Estate and Corporate. Its European commercial real estate business is primarily focused on office properties. Its portfolio consists of approximately 48 properties and a total of approximately 495,588 square meters of rentable space, located in various European markets, including Frankfurt, Hamburg, Berlin, London, Paris, Amsterdam, Milan, Brussels and Madrid. Its overall portfolio is over 87% occupied. In addition, it owns over two hotels, which are leased to third-party operators. It is externally managed and advised by an affiliate of NorthStar Asset Management Group Inc. (NSAM).

About TIER REIT

TIER REIT, Inc. is a real estate investment trust. The Company’s business consists of owning, acquiring, developing, operating, investing in, and disposing of real estate assets. The Company’s business is conducted through Tier Operating Partnership LP (Tier OP). As of December 31, 2016, the Company owned interests in 29 operating office properties, one non-operating property and one development property located in 13 markets throughout the United States. It owns properties located in metropolitan cities and suburban markets in the United States. The Company’s office properties include The Terrace Office Park, Domain 3, Domain 4, 5950 Sherry Lane, Burnett Plaza, Loop Central, One BriarLake Plaza, Three Eldridge Place, Eisenhower I, Forum Office Park, 500 E. Pratt, Woodcrest Corporate Center and 111 Woodcrest. The Company’s properties are located in Austin, Dallas, Houston, Charlotte, Nashville, Atlanta and Denver.

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