Ares Commercial Real Estate (NYSE:ACRE – Get Free Report) and AFC Gamma (NASDAQ:AFCG – Get Free Report) are both small-cap finance companies, but which is the better stock? We will contrast the two companies based on the strength of their profitability, institutional ownership, valuation, earnings, dividends, analyst recommendations and risk.
Insider and Institutional Ownership
41.3% of Ares Commercial Real Estate shares are held by institutional investors. Comparatively, 26.5% of AFC Gamma shares are held by institutional investors. 1.8% of Ares Commercial Real Estate shares are held by company insiders. Comparatively, 25.1% of AFC Gamma shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.
Analyst Ratings
This is a summary of current ratings for Ares Commercial Real Estate and AFC Gamma, as provided by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Ares Commercial Real Estate | 0 | 5 | 0 | 0 | 2.00 |
| AFC Gamma | 0 | 3 | 0 | 1 | 2.50 |
Valuation and Earnings
This table compares Ares Commercial Real Estate and AFC Gamma”s revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Ares Commercial Real Estate | $4.91 million | 53.38 | -$34.99 million | ($0.34) | -14.01 |
| AFC Gamma | $51.99 million | 1.80 | $16.78 million | ($0.41) | -10.12 |
AFC Gamma has higher revenue and earnings than Ares Commercial Real Estate. Ares Commercial Real Estate is trading at a lower price-to-earnings ratio than AFC Gamma, indicating that it is currently the more affordable of the two stocks.
Dividends
Ares Commercial Real Estate pays an annual dividend of $0.60 per share and has a dividend yield of 12.6%. AFC Gamma pays an annual dividend of $0.60 per share and has a dividend yield of 14.5%. Ares Commercial Real Estate pays out -176.5% of its earnings in the form of a dividend. AFC Gamma pays out -146.3% 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.
Volatility & Risk
Ares Commercial Real Estate has a beta of 1.32, suggesting that its share price is 32% more volatile than the S&P 500. Comparatively, AFC Gamma has a beta of 1.07, suggesting that its share price is 7% more volatile than the S&P 500.
Profitability
This table compares Ares Commercial Real Estate and AFC Gamma’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Ares Commercial Real Estate | -29.57% | -5.44% | -1.78% |
| AFC Gamma | -25.35% | 10.06% | 5.78% |
Summary
AFC Gamma beats Ares Commercial Real Estate on 11 of the 16 factors compared between the two stocks.
About Ares Commercial Real Estate
Ares Commercial Real Estate Corporation, a specialty finance company, originates and invests in commercial real estate (CRE) loans and related investments in the United States. It provides a range of financing solutions for the owners, operators, and sponsors of CRE properties. The company originates senior mortgage loans, subordinate debt and preferred equity products, mezzanine loans, and other CRE investments, including commercial mortgage-backed securities. It has elected and qualified to be taxed as a real estate investment trust for the United States federal income tax purposes under the Internal Revenue Code of 1986. Ares Commercial Real Estate Corporation was incorporated in 2011 and is based in New York, New York.
About AFC Gamma
AFC Gamma, Inc. originates, structures, underwrites, and invests in senior secured loans, and other various commercial real estate loans and debt securities for established companies operating in the cannabis industry. It primarily originates loans structured as senior loans secured by real estate, equipment, and licenses and/or other assets of the loan parties to the extent permitted by applicable laws and the regulations governing such loan parties. The company has elected and qualified to be taxed as a real estate investment trust for the United States federal income tax purposes under the Internal Revenue Code of 1986. AFC Gamma, Inc. was incorporated in 2020 and is based in West Palm Beach, Florida.
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