Financial Analysis: Seven Hills Realty Trust (NASDAQ:SEVN) & Starwood Property Trust (NYSE:STWD)

Starwood Property Trust (NYSE:STWD) and Seven Hills Realty Trust (NASDAQ:SEVN) are both finance companies, but which is the better investment? We will compare the two companies based on the strength of their institutional ownership, analyst recommendations, risk, profitability, earnings, valuation and dividends.

Institutional and Insider Ownership

49.8% of Starwood Property Trust shares are held by institutional investors. 5.8% of Starwood Property Trust shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Starwood Property Trust and Seven Hills Realty Trust, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Starwood Property Trust	0	3	4	0	2.57
Seven Hills Realty Trust	1	0	5	0	2.67

Starwood Property Trust presently has a consensus price target of $19.50, indicating a potential upside of 18.47%. Seven Hills Realty Trust has a consensus price target of $10.38, indicating a potential upside of 35.44%. Given Seven Hills Realty Trust’s stronger consensus rating and higher possible upside, analysts plainly believe Seven Hills Realty Trust is more favorable than Starwood Property Trust.

Profitability

This table compares Starwood Property Trust and Seven Hills Realty Trust’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Starwood Property Trust	11.35%	7.85%	0.89%
Seven Hills Realty Trust	N/A	N/A	N/A

Dividends

Starwood Property Trust pays an annual dividend of $1.92 per share and has a dividend yield of 11.7%. Seven Hills Realty Trust pays an annual dividend of $1.12 per share and has a dividend yield of 14.6%. Starwood Property Trust pays out 325.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Seven Hills Realty Trust pays out 76.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Seven Hills Realty Trust is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares Starwood Property Trust and Seven Hills Realty Trust”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Starwood Property Trust	$811.72 million	7.51	$411.54 million	$0.59	27.90
Seven Hills Realty Trust	$25.58 million	N/A	N/A	$1.46	5.25

Starwood Property Trust has higher revenue and earnings than Seven Hills Realty Trust. Seven Hills Realty Trust is trading at a lower price-to-earnings ratio than Starwood Property Trust, indicating that it is currently the more affordable of the two stocks.

Summary

Starwood Property Trust beats Seven Hills Realty Trust on 7 of the 13 factors compared between the two stocks.

About Starwood Property Trust

Starwood Property Trust, Inc. operates as a real estate investment trust (REIT) in the United States and internationally. The company operates through Commercial and Residential Lending, Infrastructure Lending, Property, and Investing and Servicing segments. The Commercial and Residential Lending segment originates, acquires, finances, and manages commercial first mortgages, non-agency residential mortgages, subordinated mortgages, mezzanine loans, preferred equity, commercial mortgage-backed securities (CMBS), and residential mortgage-backed securities, as well as other real estate and real estate-related debt investments, include distressed or non-performing loans. The Infrastructure lending segment originates, acquires, finances, and manages infrastructure debt investments. The Property segment engages primarily in acquiring and managing equity interests in stabilized commercial real estate properties, such as multifamily properties and commercial properties subject to net leases, that are held for investment. The Investing and Servicing segment manages and works out problem assets; acquires and manages unrated, investment grade, and non-investment grade rated CMBS comprising subordinated interests of securitization and re-securitization transactions; originates conduit loans for the primary purpose of selling these loans into securitization transactions; and acquires commercial real estate assets that include properties acquired from CMBS trusts. The company qualifies as a REIT for federal income tax purposes and would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. The company was incorporated in 2009 and is headquartered in Greenwich, Connecticut.

About Seven Hills Realty Trust

Seven Hills Realty Trust, a real estate investment trust, focuses on originating and investing in first mortgage loans secured by middle market and transitional commercial real estate in the United States. The company has elected to be taxed as a real estate investment trust. As a result, it would not be subject to corporate income tax on that portion of its net income that is distributed to shareholders. The company was formerly known as RMR Mortgage Trust. Seven Hills Realty Trust was incorporated in 2008 and is headquartered in Newton, Massachusetts.