Critical Review: NexPoint Residential Trust (NYSE:NXRT) and Centerspace (NYSE:CSR)

Centerspace (NYSE:CSR) and NexPoint Residential Trust (NYSE:NXRT) are both small-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their analyst recommendations, profitability, dividends, risk, valuation, earnings and institutional ownership.

Insider and Institutional Ownership

79.0% of Centerspace shares are held by institutional investors. Comparatively, 76.6% of NexPoint Residential Trust shares are held by institutional investors. 0.4% of Centerspace shares are held by insiders. Comparatively, 15.4% of NexPoint Residential Trust shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Earnings & Valuation

This table compares Centerspace and NexPoint Residential Trust”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Centerspace	$273.66 million	3.85	$17.59 million	$1.00	62.81
NexPoint Residential Trust	$251.28 million	2.72	-$32.03 million	($1.27)	-21.17

Centerspace has higher revenue and earnings than NexPoint Residential Trust. NexPoint Residential Trust is trading at a lower price-to-earnings ratio than Centerspace, indicating that it is currently the more affordable of the two stocks.

Risk & Volatility

Centerspace has a beta of 0.79, meaning that its stock price is 21% less volatile than the S&P 500. Comparatively, NexPoint Residential Trust has a beta of 1.19, meaning that its stock price is 19% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Centerspace and NexPoint Residential Trust, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Centerspace	0	6	2	0	2.25
NexPoint Residential Trust	2	5	0	0	1.71

Centerspace presently has a consensus target price of $69.57, suggesting a potential upside of 10.77%. NexPoint Residential Trust has a consensus target price of $39.88, suggesting a potential upside of 48.29%. Given NexPoint Residential Trust’s higher probable upside, analysts clearly believe NexPoint Residential Trust is more favorable than Centerspace.

Profitability

This table compares Centerspace and NexPoint Residential Trust’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Centerspace	6.25%	2.00%	0.86%
NexPoint Residential Trust	-12.74%	-9.52%	-1.72%

Dividends

Centerspace pays an annual dividend of $3.08 per share and has a dividend yield of 4.9%. NexPoint Residential Trust pays an annual dividend of $2.12 per share and has a dividend yield of 7.9%. Centerspace pays out 308.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. NexPoint Residential Trust pays out -166.9% of its earnings in the form of a dividend. Centerspace has increased its dividend for 2 consecutive years and NexPoint Residential Trust has increased its dividend for 3 consecutive years. NexPoint Residential Trust is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Centerspace beats NexPoint Residential Trust on 11 of the 17 factors compared between the two stocks.

About Centerspace

Centerspace is an owner and operator of apartment communities committed to providing great homes by focusing on integrity and serving others. Founded in 1970, as of September 30, 2023, Centerspace owned interests in 71 apartment communities consisting of 12,785 apartment homes located in Colorado, Minnesota, Montana, Nebraska, North Dakota, and South Dakota. Centerspace was named a Top Workplace for the fourth consecutive year in 2023 by the Minneapolis Star Tribune.

About NexPoint Residential Trust

NexPoint Residential Trust is a publicly traded REIT, with its shares listed on the New York Stock Exchange under the symbol “NXRT,” primarily focused on acquiring, owning and operating well-located middle-income multifamily properties with “value-add” potential in large cities and suburban submarkets of large cities, primarily in the Southeastern and Southwestern United States. NXRT is externally advised by NexPoint Real Estate Advisors, L.P., an affiliate of NexPoint Advisors, L.P., an SEC-registered investment advisor, which has extensive real estate experience.