Critical Analysis: Hudson Pacific Properties (NYSE:HPP) versus Orion Office REIT (NYSE:ONL)

Hudson Pacific Properties (NYSE:HPP) and Orion Office REIT (NYSE:ONL) are both small-cap real estate companies, but which is the superior investment? We will compare the two companies based on the strength of their earnings, analyst recommendations, valuation, profitability, dividends, risk and institutional ownership.

Insider and Institutional Ownership

97.6% of Hudson Pacific Properties shares are held by institutional investors. Comparatively, 79.9% of Orion Office REIT shares are held by institutional investors. 2.5% of Hudson Pacific Properties shares are held by insiders. Comparatively, 1.6% of Orion Office REIT 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.

Dividends

Hudson Pacific Properties pays an annual dividend of $0.10 per share and has a dividend yield of 1.2%. Orion Office REIT pays an annual dividend of $0.08 per share and has a dividend yield of 3.0%. Hudson Pacific Properties pays out -1.0% of its earnings in the form of a dividend. Orion Office REIT pays out -15.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Orion Office REIT is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a breakdown of recent recommendations for Hudson Pacific Properties and Orion Office REIT, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Hudson Pacific Properties	3	7	3	0	2.00
Orion Office REIT	1	0	1	0	2.00

Hudson Pacific Properties presently has a consensus target price of $15.27, indicating a potential upside of 76.67%. Orion Office REIT has a consensus target price of $3.50, indicating a potential upside of 32.33%. Given Hudson Pacific Properties’ higher possible upside, research analysts clearly believe Hudson Pacific Properties is more favorable than Orion Office REIT.

Profitability

This table compares Hudson Pacific Properties and Orion Office REIT’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Hudson Pacific Properties	-80.01%	-25.07%	-9.02%
Orion Office REIT	-19.89%	-4.50%	-2.42%

Volatility & Risk

Hudson Pacific Properties has a beta of 2.02, suggesting that its stock price is 102% more volatile than the S&P 500. Comparatively, Orion Office REIT has a beta of 1.59, suggesting that its stock price is 59% more volatile than the S&P 500.

Earnings & Valuation

This table compares Hudson Pacific Properties and Orion Office REIT”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Hudson Pacific Properties	$807.07 million	0.58	-$561.69 million	($10.13)	-0.85
Orion Office REIT	$141.23 million	1.07	-$139.31 million	($0.52)	-5.09

Orion Office REIT has lower revenue, but higher earnings than Hudson Pacific Properties. Orion Office REIT 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.

Summary

Orion Office REIT beats Hudson Pacific Properties on 8 of the 15 factors compared between the two stocks.

About Hudson Pacific Properties

Hudson Pacific Properties is a real estate investment trust that owns, operates and develops office and studio properties. Its office buildings serve businesses in sectors such as technology, media and entertainment, while its studio facilities provide sound stages and production space for film and television work. The company’s properties are concentrated in major West Coast markets, including Los Angeles, the San Francisco Bay Area and Seattle, as well as Vancouver, British Columbia. Its studio platform, Sunset Studios, supports production activity with purpose-built facilities and related services.

About Orion Office REIT

Orion Office REIT Inc. (NYSE: ONL) is a real estate investment trust focused on owning and managing office properties. Its portfolio has primarily consisted of office buildings leased to single tenants, with an emphasis on properties occupied by creditworthy tenants and supported by long-term leases. The company was formed through a 2021 spin-off from Realty Income Corporation. At the time of the separation, Orion Office REIT received a portfolio of office properties located across multiple U.S. states, serving tenants in a range of industries and government-related sectors.