HCP (HCP) versus Physicians Realty Trust (DOC) Critical Analysis

Physicians Realty Trust (NYSE: DOC) and HCP (NYSE:HCP) are both mid-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, institutional ownership, risk, dividends, analyst recommendations, earnings and valuation.

Volatility and Risk

Physicians Realty Trust has a beta of 0.55, indicating that its share price is 45% less volatile than the S&P 500. Comparatively, HCP has a beta of 0.38, indicating that its share price is 62% less volatile than the S&P 500.

Profitability

This table compares Physicians Realty Trust and HCP’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Physicians Realty Trust 11.51% 1.75% 1.10%
HCP 32.16% 9.96% 4.19%

Insider & Institutional Ownership

94.3% of Physicians Realty Trust shares are owned by institutional investors. Comparatively, 89.8% of HCP shares are owned by institutional investors. 0.5% of Physicians Realty Trust shares are owned by insiders. Comparatively, 0.2% of HCP shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Earnings & Valuation

This table compares Physicians Realty Trust and HCP’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Physicians Realty Trust $296.22 million 9.96 $195.49 million $0.23 81.48
HCP $2.02 billion 6.84 $1.17 billion $1.45 20.31

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

Analyst Recommendations

This is a breakdown of current ratings and target prices for Physicians Realty Trust and HCP, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Physicians Realty Trust 0 3 9 0 2.75
HCP 1 12 2 0 2.07

Physicians Realty Trust currently has a consensus target price of $20.55, indicating a potential upside of 9.63%. HCP has a consensus target price of $32.33, indicating a potential upside of 9.79%. Given HCP’s higher possible upside, analysts plainly believe HCP is more favorable than Physicians Realty Trust.

Dividends

Physicians Realty Trust pays an annual dividend of $0.92 per share and has a dividend yield of 4.9%. HCP pays an annual dividend of $1.48 per share and has a dividend yield of 5.0%. Physicians Realty Trust pays out 400.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. HCP pays out 102.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. HCP is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

HCP beats Physicians Realty Trust on 9 of the 16 factors compared between the two stocks.

About Physicians Realty Trust

Physicians Realty Trust (the Trust) is a real estate investment trust. Physicians Realty L.P. is the operating partnership of the Trust. The Trust and its operating partnership are engaged in acquiring, developing, owning and managing healthcare properties that are leased to physicians, hospitals and healthcare delivery systems. As of December 31, 2016, the Company’s portfolio consisted of 246 properties located in 29 states with approximately 10,883,601 net leasable square feet. The Company invests in real estate that is integral to providing healthcare services. The Company focuses its investment activity on various types of healthcare properties, such as medical office buildings; outpatient treatment and diagnostic facilities; physician group practice clinics; ambulatory surgery centers, and specialty hospitals and treatment centers. Its properties include Arrowhead Commons, Aurora Medical Office Building, Decatur Medical Office Building and El Paso Medical Office Building.

About HCP

HCP, Inc. is a self-administered real estate investment trust. The Company invests in real estate serving the healthcare industry in the United States. The Company’s segments include senior housing triple-net (SH NNN), senior housing operating portfolio (SHOP), life science and medical office. Its senior housing facilities include independent living facilities, assisted living facilities, memory care facilities, care homes, and continuing care retirement communities. Its Life science properties contain laboratory and office space for biotechnology, medical device and pharmaceutical companies, scientific research institutions, government agencies and other organizations. Its Medical office buildings contain physicians’ offices and examination rooms, and may include pharmacies, hospital ancillary service space and outpatient services. As of December 31, 2016, it had interests in and managed 15 hospitals, 61 care homes in the United Kingdom and five post-acute/skilled nursing facilities.

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