NYSE:ACRE

Stock Analysis Report

Executive Summary

Ares Commercial Real Estate Corporation, a specialty finance company, originates and invests in commercial real estate loans and related investments in the United States.

Rewards

Trading at 34.9% below its fair value

Earnings are forecast to grow 11.67% per year

Earnings grew by 7.5% over the past year

Risk Analysis

Dividend of 8.13% is not well covered by earnings or forecast to be in the next 3 years



Snowflake Analysis

Good value with acceptable track record.


Similar Companies

Share Price & News

How has Ares Commercial Real Estate's share price performed over time and what events caused price changes?


Latest Share Price and Events

Stable Share Price: ACRE has not had significant price volatility in the past 3 months.


Market Performance


7 Day Return

1.7%

ACRE

1.5%

US Mortgage REITs

1.7%

US Market


1 Year Return

17.9%

ACRE

4.7%

US Mortgage REITs

23.2%

US Market

Return vs Industry: ACRE exceeded the US Mortgage REITs industry which returned 4.4% over the past year.

Return vs Market: ACRE underperformed the US Market which returned 24.7% over the past year.


Shareholder returns

ACREIndustryMarket
7 Day1.7%1.5%1.7%
30 Day2.7%1.7%4.2%
90 Day7.3%6.3%11.9%
1 Year28.4%17.9%16.2%4.7%25.8%23.2%
3 Year55.4%20.5%43.8%4.0%52.8%42.9%
5 Year108.8%36.3%68.3%-3.3%75.2%55.8%

Price Volatility Vs. Market

How volatile is Ares Commercial Real Estate's share price compared to the market and industry in the last 5 years?


Simply Wall St News

Valuation

Is Ares Commercial Real Estate undervalued compared to its fair value and its price relative to the market?

34.2%

Undervalued compared to fair value


Share Price vs. Fair Value

Below Fair Value: ACRE ($16.23) is trading below our estimate of fair value ($24.93)

Significantly Below Fair Value: ACRE is trading below fair value by more than 20%.


Price To Earnings Ratio

PE vs Industry: ACRE is good value based on its PE Ratio (12.4x) compared to the Mortgage REITs industry average (13.7x).

PE vs Market: ACRE is good value based on its PE Ratio (12.4x) compared to the US market (18.9x).


Price to Earnings Growth Ratio

PEG Ratio: ACRE is poor value based on its PEG Ratio (1.1x)


Price to Book Ratio

PB vs Industry: ACRE is overvalued based on its PB Ratio (1.1x) compared to the US Mortgage REITs industry average (1x).


Next Steps

Future Growth

How is Ares Commercial Real Estate forecast to perform in the next 1 to 3 years based on estimates from 5 analysts?

11.7%

Forecasted annual earnings growth


Earnings and Revenue Growth Forecasts


Analyst Future Growth Forecasts

Earnings vs Savings Rate: ACRE's forecast earnings growth (11.7% per year) is above the savings rate (1.7%).

Earnings vs Market: ACRE's earnings (11.7% per year) are forecast to grow slower than the US market (14.3% per year).

High Growth Earnings: ACRE's earnings are forecast to grow, but not significantly.

Revenue vs Market: ACRE's revenue (3% per year) is forecast to grow slower than the US market (7.5% per year).

High Growth Revenue: ACRE's revenue (3% per year) is forecast to grow slower than 20% per year.


Earnings per Share Growth Forecasts


Future Return on Equity

Future ROE: ACRE's Return on Equity is forecast to be low in 3 years time (8.3%).


Next Steps

Past Performance

How has Ares Commercial Real Estate performed over the past 5 years?

11.1%

Historical annual earnings growth


Earnings and Revenue History

Quality Earnings: ACRE has high quality earnings.

Growing Profit Margin: ACRE's current net profit margins (53.6%) are lower than last year (67.3%).


Past Earnings Growth Analysis

Earnings Trend: ACRE's earnings have grown by 11.1% per year over the past 5 years.

Accelerating Growth: ACRE's earnings growth over the past year (7.5%) is below its 5-year average (11.1% per year).

Earnings vs Industry: ACRE earnings growth over the past year (7.5%) exceeded the Mortgage REITs industry 0.1%.


Return on Equity

High ROE: ACRE's Return on Equity (8.8%) is considered low.


Return on Assets


Return on Capital Employed


Next Steps

Financial Health

How is Ares Commercial Real Estate's financial position? (This company is analysed differently as a bank or financial institution)


Financial Position Analysis


Debt to Equity History and Analysis


Balance Sheet

Inventory Level: ACRE has a low level of unsold assets or inventory.

Debt Coverage by Assets: ACRE's debt is covered by short term assets (assets are 1.3x debt).


Financial Institutions Analysis

Asset Level: ACRE's level of assets compared to its equity is low.

Allowance for Bad Loans: Insufficient data to determine if ACRE has a sufficient allowance for bad loans.

Low Risk Liabilities: ACRE reports no customer deposits, loans are made up entirely of externally borrowed funds.

Loan Level: Insufficient data to determine if ACRE has an acceptable proportion of non-loan assets held.

Low Risk Deposits: ACRE has advanced significantly more loans than the customer deposits it holds.

Level of Bad Loans: Insufficient data to determine if ACRE has an appropriate level of bad loans.


Next Steps

Dividend

What is Ares Commercial Real Estate's current dividend yield, its reliability and sustainability?

8.04%

Current Dividend Yield


Dividend Yield vs Market

company8.0%marketbottom25%1.4%markettop25%3.6%industryaverage9.7%forecastin3Years8.1%

Current dividend yield vs market & industry

Notable Dividend: ACRE's dividend (8.13%) is higher than the bottom 25% of dividend payers in the US market (1.4%).

High Dividend: ACRE's dividend (8.13%) is in the top 25% of dividend payers in the US market (3.66%)


Stability and Growth of Payments

Stable Dividend: Whilst dividend payments have been stable, ACRE has been paying a dividend for less than 10 years.

Growing Dividend: ACRE's dividend payments have increased, but the company has only paid a dividend for 8 years.


Current Payout to Shareholders

Dividend Coverage: With its high payout ratio (99.5%), ACRE's dividend payments are not well covered by earnings.


Future Payout to Shareholders

Future Dividend Coverage: ACRE's dividends in 3 years are not forecast to be well covered by earnings (98.8% payout ratio).


Next Steps

Management

What is the CEO of Ares Commercial Real Estate's salary, the management and board of directors tenure and is there insider trading?

0.8yrs

Average management tenure


CEO

Bryan Donohoe 0

0.08yrs

Tenure

0

Mr. Bryan Donohoe serves as Partner and Head of Real Estate Debt of Ares Real Estate Group at Ares Management Corporation since 2019. He is Chief Executive Officer and Partner at Ares Commercial Real Estat ...


Management Age and Tenure

0.8yrs

Average Tenure

50.5yo

Average Age

Experienced Management: ACRE's management team is not considered experienced ( 0.8 years average tenure), which suggests a new team.


Board Age and Tenure

3.8yrs

Average Tenure

61yo

Average Age

Experienced Board: ACRE's board of directors are considered experienced (3.8 years average tenure).


Insider Trading

Insider Buying: ACRE insiders have only sold shares in the past 3 months.


Recent Insider Transactions

SellUS$196,31506 Jan 20
James Henderson
EntityIndividual
Role
Member of the Board of Directors
Partner & Director
Shares12,515
Max PriceUS$15.69
SellUS$302,50309 Dec 19
James Henderson
EntityIndividual
Role
Member of the Board of Directors
Partner & Director
Shares19,500
Max PriceUS$15.53
BuyUS$149,99615 Mar 19
Rand April
EntityIndividual
Role
Member of the Board of Directors
Independent Director
Shares9,730
Max PriceUS$15.42
BuyUS$50,03908 Mar 19
William Benjamin
EntityIndividual
Role
Chairman of the Board
Chairman of the Board
Shares3,300
Max PriceUS$15.16

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.


Management Team

  • Tae-Sik Yoon (52yo)

    CFO & Treasurer

    • Tenure: 7.5yrs
    • Compensation: US$755.60k
  • David Roth (52yo)

    President

    • Tenure: 0.5yrs
  • Carl Drake

    Partner/Head of Public Investor Relations & Communications

    • Anton Feingold (38yo)

      General Counsel

      • Tenure: 1yrs
    • Don Haisch

      Chief Accounting Officer

      • Tenure: 5.9yrs
    • Keith Kooper

      VP & Assistant Secretary

      • Jamie Henderson (49yo)

        Partner & Director

        • Tenure: 2.3yrs
        • Compensation: US$559.60k
      • Michele Brancati

        Investor Relations Contact

        • Veronica Mendiola Mayer

          Vice President of Public Investor Relations & Communications

          • Bryan Donohoe

            Partner & CEO

            • Tenure: 0.08yrs

          Board Members

          • Mike Arougheti (47yo)

            Director

            • Tenure: 8.3yrs
          • Bill Benjamin (54yo)

            Chairman of the Board

            • Tenure: 1.9yrs
          • James Skinner (66yo)

            Independent Director

            • Tenure: 3.8yrs
            • Compensation: US$135.00k
          • Rand April (68yo)

            Independent Director

            • Tenure: 3.8yrs
            • Compensation: US$124.00k
          • Ed Moriarty (58yo)

            Independent Director

            • Tenure: 1.8yrs
            • Compensation: US$162.00k
          • Caroline Blakely (64yo)

            Lead Independent Director

            • Compensation: US$135.00k
          • Bill Browning (65yo)

            Independent Director

            • Tenure: 5.9yrs
            • Compensation: US$137.00k
          • Jamie Henderson (49yo)

            Partner & Director

            • Tenure: 2.3yrs
            • Compensation: US$559.60k

          Company Information

          Ares Commercial Real Estate Corporation's company bio, employee growth, exchange listings and data sources


          Key Information

          • Name: Ares Commercial Real Estate Corporation
          • Ticker: ACRE
          • Exchange: NYSE
          • Founded: 2011
          • Industry: Mortgage REITs
          • Sector: Diversified Financials
          • Market Cap: US$469.897m
          • Shares outstanding: 28.63m
          • Website: https://www.arescre.com

          Location

          • Ares Commercial Real Estate Corporation
          • 245 Park Avenue
          • 42nd Floor
          • New York
          • New York
          • 10167
          • United States

          Listings

          TickerExchangePrimary SecuritySecurity TypeCountryCurrencyListed on
          ACRENYSE (New York Stock Exchange)YesCommon StockUSUSDApr 2012

          Biography

          Ares Commercial Real Estate Corporation, a specialty finance company, originates and invests in commercial real estate loans and related investments in the United States. It provides a range of financing solutions for the owners, operators, and sponsors of commercial real estate (CRE) properties. The company originates senior mortgage loans, subordinate debt products, real estate preferred equity investments, mezzanine loans, and other CRE investments. Ares Commercial Real Estate Corporation has elected and qualified to be taxed as a real estate investment trust for the United States federal income tax purposes under the Internal Revenue Code of 1986. Ares Commercial Real Estate Management LLC operates as the manager of the company. The company was founded in 2011 and is headquartered in New York, New York. 


          Company Analysis and Financial Data Status

          All financial data provided by Standard & Poor's Capital IQ.
          DataLast Updated (UTC time)
          Company Analysis2020/01/17 02:14
          End of Day Share Price2020/01/16 00:00
          Earnings2019/09/30
          Annual Earnings2018/12/31


          Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.