Pennsylvania Real Estate Investment Trust (PEI) & National Retail Properties (NNN) Financial Analysis

Pennsylvania Real Estate Investment Trust (NYSE: PEI) and National Retail Properties (NYSE:NNN) are both finance companies, but which is the superior business? We will contrast the two companies based on the strength of their valuation, analyst recommendations, earnings, risk, institutional ownership, profitability and dividends.

Dividends

Pennsylvania Real Estate Investment Trust pays an annual dividend of $0.84 per share and has a dividend yield of 7.6%. National Retail Properties pays an annual dividend of $1.90 per share and has a dividend yield of 4.4%. Pennsylvania Real Estate Investment Trust pays out -67.7% of its earnings in the form of a dividend. National Retail Properties pays out 135.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Pennsylvania Real Estate Investment Trust has increased its dividend for 7 consecutive years and National Retail Properties has increased its dividend for 5 consecutive years. Pennsylvania Real Estate Investment Trust is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Pennsylvania Real Estate Investment Trust and National Retail Properties’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Pennsylvania Real Estate Investment Trust -16.35% -7.60% -2.34%
National Retail Properties 44.96% 8.47% 4.08%

Earnings and Valuation

This table compares Pennsylvania Real Estate Investment Trust and National Retail Properties’ revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Pennsylvania Real Estate Investment Trust $399.95 million 1.93 -$11.34 million ($1.24) -8.90
National Retail Properties $533.65 million 12.23 $239.50 million $1.40 30.67

National Retail Properties has higher revenue and earnings than Pennsylvania Real Estate Investment Trust. Pennsylvania Real Estate Investment Trust is trading at a lower price-to-earnings ratio than National Retail Properties, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Pennsylvania Real Estate Investment Trust has a beta of 1.35, indicating that its stock price is 35% more volatile than the S&P 500. Comparatively, National Retail Properties has a beta of 0.39, indicating that its stock price is 61% less volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings and recommmendations for Pennsylvania Real Estate Investment Trust and National Retail Properties, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Pennsylvania Real Estate Investment Trust 1 6 0 0 1.86
National Retail Properties 0 0 5 0 3.00

Pennsylvania Real Estate Investment Trust presently has a consensus target price of $13.83, suggesting a potential upside of 25.30%. National Retail Properties has a consensus target price of $49.00, suggesting a potential upside of 14.11%. Given Pennsylvania Real Estate Investment Trust’s higher possible upside, equities research analysts clearly believe Pennsylvania Real Estate Investment Trust is more favorable than National Retail Properties.

Insider & Institutional Ownership

97.7% of Pennsylvania Real Estate Investment Trust shares are owned by institutional investors. Comparatively, 90.5% of National Retail Properties shares are owned by institutional investors. 4.4% of Pennsylvania Real Estate Investment Trust shares are owned by company insiders. Comparatively, 1.0% of National Retail Properties 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

National Retail Properties beats Pennsylvania Real Estate Investment Trust on 10 of the 17 factors compared between the two stocks.

About Pennsylvania Real Estate Investment Trust

Pennsylvania Real Estate Investment Trust (PREIT) is a self-managed and self-administered real estate investment trust (REIT). The Company’s primary business is owning and operating retail shopping malls, which it does primarily through operating partnership, PREIT Associates, L.P. (PREIT Associates). The Company is engaged in the ownership, management, leasing, acquisition, redevelopment, development and disposition of shopping malls. The Company has a primary investment focus on retail shopping malls located in the eastern half of the United States, primarily in the Mid-Atlantic region. As of December 31, 2016, the Company owned interests in 30 retail properties, of which 26 are operating properties and four are development or redevelopment properties. As of December 31, 2016, the Company’s 26 operating properties included 22 shopping malls and four other retail properties, had a total of 21.7 million square feet and were located in nine states.

About National Retail Properties

National Retail Properties, Inc. is a real estate investment trust (REIT). The Company acquires, owns, invests in and develops properties that are leased primarily to retail tenants under long-term net leases and are primarily held for investment. As of December 31, 2016, it owned 2,535 properties with an aggregate gross leasable area of approximately 27,204,000 square feet, located in 48 states. The Company focuses on investing in a range of property and tenant types; leases, mortgages and other types of real estate interests; loans secured by personal property; loans secured by partnership or membership interests in partnerships or limited liability companies, and securities of other REITs, or other issuers, including for the purpose of exercising control over such entities. The Company owns a portfolio of freestanding retail stores across the United States. It owns approximately 2,290 stores, which are leased to over 400 tenants in approximately 40 different retail categories.

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