Contrasting Farmland Partners (FPI) and Drive Shack (DS)

Drive Shack (NYSE: DS) and Farmland Partners (NYSE:FPI) are both small-cap consumer discretionary companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, risk, analyst recommendations, profitability, earnings, dividends and valuation.

Dividends

Drive Shack pays an annual dividend of $0.24 per share and has a dividend yield of 9.1%. Farmland Partners pays an annual dividend of $0.51 per share and has a dividend yield of 5.8%. Drive Shack pays out -68.6% of its earnings in the form of a dividend. Farmland Partners pays out 425.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Farmland Partners has raised its dividend for 2 consecutive years. Drive Shack is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares Drive Shack and Farmland Partners’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Drive Shack $292.74 million 0.60 $8.22 million ($0.35) -7.51
Farmland Partners $38.89 million 7.36 $24.04 million $0.12 73.26

Farmland Partners has higher revenue, but lower earnings than Drive Shack. Drive Shack is trading at a lower price-to-earnings ratio than Farmland Partners, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of recent ratings and price targets for Drive Shack and Farmland Partners, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Drive Shack 0 1 0 0 2.00
Farmland Partners 0 2 2 0 2.50

Drive Shack currently has a consensus target price of $3.75, indicating a potential upside of 42.59%. Farmland Partners has a consensus target price of $10.38, indicating a potential upside of 18.03%. Given Drive Shack’s higher possible upside, analysts clearly believe Drive Shack is more favorable than Farmland Partners.

Institutional & Insider Ownership

38.6% of Drive Shack shares are held by institutional investors. Comparatively, 38.9% of Farmland Partners shares are held by institutional investors. 7.2% of Drive Shack shares are held by insiders. Comparatively, 2.8% of Farmland Partners shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Risk & Volatility

Drive Shack has a beta of 1.14, meaning that its stock price is 14% more volatile than the S&P 500. Comparatively, Farmland Partners has a beta of 0.18, meaning that its stock price is 82% less volatile than the S&P 500.

Profitability

This table compares Drive Shack and Farmland Partners’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Drive Shack -7.05% 25.92% 3.08%
Farmland Partners 12.46% 1.66% 0.60%

Drive Shack Company Profile

Drive Shack Inc., formerly Newcastle Investment Corp., is a leisure company. The Company is an owner and operator of golf-related leisure and entertainment businesses. The Company’s portfolio consists of Drive Shack, which is engaged in developing nationwide network of golf entertainment venues; American Golf Corporation, which is a golf course company, and real estate-related assets. American Golf Corporation operates approximately 90 private, resort and public golf courses throughout the United States. It has a range of public and private golf courses in California, New York, and Georgia. It operates multiple facilities that provide golf, tennis, swimming and spa facilities, among others. Its online Pro Shop offers a range of golf gifts, such as personalized golf balls, golf luggage and accessories. Its public golf courses equipped with practice areas, golf shops, driving ranges, and food and beverage options.

Farmland Partners Company Profile

Farmland Partners, Inc. is an internally managed real estate company. The Company owns and seeks to acquire farmland located in agricultural markets throughout North America. The Company is the sole member of the general partner of Farmland Partners Operating Partnership, LP (the Operating Partnership). All of the Company’s assets are held by, and its operations are primarily conducted through, the Operating Partnership and the subsidiaries of the Operating Partnership. The Company’s principal investment focus is on farmland located in agricultural markets throughout North America, however, it may seek to acquire farmland outside of North America. It also may acquire properties related to farming, such as grain storage facilities, grain elevators, feedlots, cold storage facilities, processing plants and distribution centers, as well as livestock farms or ranches. As of December 31, 2016, the Company owned approximately 115,489 acres, as well as eight grain storage facilities.

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