Paramount Group (PGRE) and Hudson Pacific Properties (HPP) Critical Contrast

Paramount Group (NYSE: PGRE) and Hudson Pacific Properties (NYSE:HPP) are both mid-cap finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their profitability, institutional ownership, risk, valuation, analyst recommendations, dividends and earnings.

Institutional and Insider Ownership

62.6% of Paramount Group shares are held by institutional investors. 5.7% of Paramount Group shares are held by insiders. Comparatively, 0.3% of Hudson Pacific Properties shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Profitability

This table compares Paramount Group and Hudson Pacific Properties’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Paramount Group 12.29% 1.76% 0.99%
Hudson Pacific Properties 8.98% 1.58% 0.91%

Earnings & Valuation

This table compares Paramount Group and Hudson Pacific Properties’ gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Paramount Group $683.34 million 5.74 -$9.93 million $0.37 44.14
Hudson Pacific Properties $639.64 million 8.65 $33.06 million $0.41 86.44

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

Dividends

Paramount Group pays an annual dividend of $0.38 per share and has a dividend yield of 2.3%. Hudson Pacific Properties pays an annual dividend of $1.00 per share and has a dividend yield of 2.8%. Paramount Group pays out 102.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Hudson Pacific Properties pays out 243.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Volatility and Risk

Paramount Group has a beta of 0.8, suggesting that its stock price is 20% less volatile than the S&P 500. Comparatively, Hudson Pacific Properties has a beta of 0.77, suggesting that its stock price is 23% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent recommendations for Paramount Group and Hudson Pacific Properties, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Paramount Group 2 0 1 0 1.67
Hudson Pacific Properties 0 2 5 0 2.71

Paramount Group currently has a consensus price target of $15.00, suggesting a potential downside of 8.14%. Hudson Pacific Properties has a consensus price target of $37.79, suggesting a potential upside of 6.62%. Given Hudson Pacific Properties’ stronger consensus rating and higher possible upside, analysts clearly believe Hudson Pacific Properties is more favorable than Paramount Group.

Summary

Paramount Group beats Hudson Pacific Properties on 9 of the 16 factors compared between the two stocks.

About Paramount Group

Paramount Group, Inc. is a fully-integrated real estate investment trust (REIT) focused on owning, operating, managing, acquiring and redeveloping Class A office properties in select central business district submarkets of New York City, Washington, District of Columbia (D.C.) and San Francisco. The Company conducts its business through, and substantially all its interests in properties and investments are held by, Paramount Group Operating Partnership LP (the Operating Partnership). The Company’s segments include New York, Washington, D.C. and San Francisco. As of December 31, 2016, the Company’s portfolio consisted of 13 Class A office properties aggregating approximately 10.8 million square feet that was 93.3% leased and 90.9% occupied. The Company also has an investment management business, where it serves as the general partner and property manager of certain private equity real estate funds for institutional investors and high-net-worth individuals.

About Hudson Pacific Properties

Hudson Pacific Properties, Inc. is a real estate investment trust (REIT). The Company operates in two segments: office properties, and media and entertainment properties. The Company is focused on acquiring, repositioning, developing and operating office and media and entertainment properties in submarkets throughout Northern and Southern California and the Pacific Northwest. As of December 31, 2016, the Company’s portfolio included office properties consisting of an aggregate of approximately 14.1 million square feet, and media and entertainment properties consisting of approximately 0.9 million square feet of sound-stage, office and supporting production facilities. As of December 31, 2016, the Company also owned undeveloped density rights for approximately 2.5 million square feet of future office and residential space. The Company’s in-service office properties include stabilized office properties and lease-up office properties.

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