Financial Analysis: Washington Prime Group (WPG) vs. AvalonBay Communities (AVB)

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Washington Prime Group (NYSE:WPG) and AvalonBay Communities (NYSE:AVB) are both finance companies, but which is the superior business? We will compare the two companies based on the strength of their institutional ownership, earnings, profitability, analyst recommendations, dividends, valuation and risk.

Earnings & Valuation

This table compares Washington Prime Group and AvalonBay Communities’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Washington Prime Group $758.12 million 1.51 $197.06 million $1.63 3.77
AvalonBay Communities $2.16 billion 12.08 $876.92 million $8.62 21.88

AvalonBay Communities has higher revenue and earnings than Washington Prime Group. Washington Prime Group is trading at a lower price-to-earnings ratio than AvalonBay Communities, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Washington Prime Group has a beta of 0.75, meaning that its share price is 25% less volatile than the S&P 500. Comparatively, AvalonBay Communities has a beta of 0.42, meaning that its share price is 58% less volatile than the S&P 500.

Dividends

Washington Prime Group pays an annual dividend of $1.00 per share and has a dividend yield of 16.3%. AvalonBay Communities pays an annual dividend of $5.88 per share and has a dividend yield of 3.1%. Washington Prime Group pays out 61.3% of its earnings in the form of a dividend. AvalonBay Communities pays out 68.2% 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. AvalonBay Communities has increased its dividend for 6 consecutive years. Washington Prime Group is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a summary of recent ratings for Washington Prime Group and AvalonBay Communities, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Washington Prime Group 1 1 0 0 1.50
AvalonBay Communities 1 10 8 0 2.37

Washington Prime Group presently has a consensus target price of $7.00, indicating a potential upside of 13.82%. AvalonBay Communities has a consensus target price of $192.88, indicating a potential upside of 2.27%. Given Washington Prime Group’s higher possible upside, equities analysts plainly believe Washington Prime Group is more favorable than AvalonBay Communities.

Profitability

This table compares Washington Prime Group and AvalonBay Communities’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Washington Prime Group 11.74% 8.45% 1.91%
AvalonBay Communities 36.54% 7.96% 4.44%

Institutional and Insider Ownership

86.7% of Washington Prime Group shares are owned by institutional investors. Comparatively, 92.5% of AvalonBay Communities shares are owned by institutional investors. 0.4% of Washington Prime Group shares are owned by company insiders. Comparatively, 0.4% of AvalonBay Communities shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Summary

AvalonBay Communities beats Washington Prime Group on 12 of the 17 factors compared between the two stocks.

About Washington Prime Group

Washington Prime Group Inc. is a retail REIT and a recognized leader in the ownership, management, acquisition and development of retail properties. The Company combines a national real estate portfolio with an investment grade balance sheet, leveraging its expertise across the entire shopping center sector to increase cash flow through rigorous management of assets and provide new opportunities to retailers looking for growth throughout the U.S. Washington Prime Group and Shelby's Sugar Shop are registered trademarks of the Company. Trademark and patent registrations for Tangible are currently pending.

About AvalonBay Communities

As of September 30, 2018, the Company owned or held a direct or indirect ownership interest in 290 apartment communities containing 84,490 apartment homes in 12 states and the District of Columbia, of which 19 communities were under development and 15 communities were under redevelopment. The Company is an equity REIT in the business of developing, redeveloping, acquiring and managing apartment communities in leading metropolitan areas primarily in New England, the New York/New Jersey Metro area, the Mid-Atlantic, the Pacific Northwest, and the Northern and Southern California regions of the United States.

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