Analyzing Paramount Group (NYSE:PGRE) and Franklin BSP Realty Trust (NYSE:FBRT)

Franklin BSP Realty Trust (NYSE:FBRT) and Paramount Group (NYSE:PGRE) are both small-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their earnings, profitability, dividends, risk, valuation, analyst recommendations and institutional ownership.

Profitability

This table compares Franklin BSP Realty Trust and Paramount Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Franklin BSP Realty Trust	43.03%	11.96%	2.62%
Paramount Group	-27.96%	-5.15%	-2.64%

Volatility and Risk

Franklin BSP Realty Trust has a beta of 1.42, indicating that its stock price is 42% more volatile than the S&P 500. Comparatively, Paramount Group has a beta of 1.25, indicating that its stock price is 25% more volatile than the S&P 500.

Dividends

Franklin BSP Realty Trust pays an annual dividend of $1.42 per share and has a dividend yield of 11.0%. Paramount Group pays an annual dividend of $0.14 per share and has a dividend yield of 2.9%. Franklin BSP Realty Trust pays out 107.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Paramount Group pays out -12.1% of its earnings in the form of a dividend.

Valuation and Earnings

This table compares Franklin BSP Realty Trust and Paramount Group’s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Franklin BSP Realty Trust	$263.95 million	4.00	$145.21 million	$1.32	9.78
Paramount Group	$742.79 million	1.41	-$259.74 million	($1.16)	-4.16

Franklin BSP Realty Trust has higher earnings, but lower revenue than Paramount Group. Paramount Group is trading at a lower price-to-earnings ratio than Franklin BSP Realty Trust, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

59.9% of Franklin BSP Realty Trust shares are held by institutional investors. Comparatively, 65.6% of Paramount Group shares are held by institutional investors. 0.7% of Franklin BSP Realty Trust shares are held by company insiders. Comparatively, 13.5% of Paramount Group shares are held by company 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.

Analyst Ratings

This is a summary of recent ratings and price targets for Franklin BSP Realty Trust and Paramount Group, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Franklin BSP Realty Trust	0	0	3	1	3.25
Paramount Group	1	2	1	0	2.00

Franklin BSP Realty Trust presently has a consensus target price of $15.25, suggesting a potential upside of 18.13%. Paramount Group has a consensus target price of $4.88, suggesting a potential upside of 0.93%. Given Franklin BSP Realty Trust’s stronger consensus rating and higher possible upside, equities analysts clearly believe Franklin BSP Realty Trust is more favorable than Paramount Group.

Summary

Franklin BSP Realty Trust beats Paramount Group on 13 of the 17 factors compared between the two stocks.

About Franklin BSP Realty Trust

Benefit Street Partners operates as a self-managed real estate investment trust (REIT). BSP earns income from investing in a leveraged portfolio of residential mortgage pass-through securities consisting almost exclusively of adjustable-rate mortgage (ARM) securities issued and guaranteed by government-sponsored enterprises, either Federal National Mortgage Association (Fannie Mae) or Federal Home Loan Mortgage Corporation (Freddie Mac) (together, the government-sponsored enterprises (GSEs)), or by an agency of the federal government, Government National Mortgage Association (Ginnie Mae). BSP’s investment strategy focuses on managing a portfolio of residential mortgage investments consisting almost exclusively of ARM Agency Securities. As of December 31, 2012, the Company’s securities consisted of Agency Securities classified as available-for-sale and Residential mortgage securities classified as held-to-maturity.

About Paramount Group

Paramount Group, Inc. ("Paramount" or the "Company") is a fully-integrated real estate investment trust that owns, operates, manages, acquires and redevelops high-quality, Class A office properties located in select central business district submarkets of New York and San Francisco. Paramount is focused on maximizing the value of its portfolio by leveraging the sought-after locations of its assets and its proven property management capabilities to attract and retain high-quality tenants.