Apollo Commercial Real Estate Finance, Inc. (NYSE: ARI)

Sector: Real Estate Industry: REIT - Mortgage CIK: 0001467760
Market Cap 1.38 Bn
P/B 0.74
P/E 11.00
P/S 5.15
ROIC (Qtr) 1.21
Div Yield % 7.75
Rev 1y % (Qtr) -13.91
Total Debt (Qtr) 7.52 Bn
Debt/Equity (Qtr) 4.04

About

Apollo Commercial Real Estate Finance, Inc. (ARI) operates in the real estate investment trust (REIT) industry, specializing in commercial first mortgage loans, subordinate financings, and other commercial real estate-related debt investments. The company is externally managed and advised by ACREFI Management, LLC, an indirect subsidiary of Apollo Global Management, Inc. ARI's primary business activities involve originating, acquiring, investing in, and managing commercial first mortgage loans, subordinate financings, and other commercial real...

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Price action

Investment thesis

Bull case

  • Operating cash flow of 184.21M provides strong 12.97x coverage of stock compensation 14.20M, indicating sustainable incentive practices.
  • Strong operating cash flow of 184.21M provides 3x coverage of SG&A expenses 61.39M, showing efficient operational cost management.
  • Operating cash flow of 184.21M provides strong 2.01x coverage of operating expenses 91.63M, showing operational efficiency.
  • Strong free cash flow of 56.13M provides 0.91x coverage of SG&A expenses 61.39M, indicating efficient cost management.
  • Free cash flow of 56.13M provides solid 0.61x coverage of operating expenses 91.63M, showing operational efficiency.

Bear case

  • Operating cash flow of 184.21M barely covers its investment activities of (354.96M), with a coverage ratio of -0.52, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 184.21M provides thin coverage of dividend payments of (140.59M) with a -1.31 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Free cash flow of 56.13M provides weak coverage of capital expenditures of 128.08M, with a 0.44 ratio suggesting additional external financing needs for growth initiatives.
  • Free cash flow of 56.13M represents just 0.15x of debt issuance 381.97M, suggesting concerning reliance on leverage rather than internal cash generation for growth.
  • Operating cash flow of 184.21M is outpaced by equity issuance of (1000) (-184212 ratio), indicating concerning reliance on equity markets for funding operations.

Peer comparison

Companies in the REIT - Mortgage
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 NLY Annaly Capital Management Inc 13.57 Bn 10.12 7.94 107.02 Bn
2 AGNC AGNC Investment Corp. 11.33 Bn 16.49 30.46 95.01 Bn
3 STWD Starwood Property Trust, Inc. 6.34 Bn 17.32 3.51 21.43 Bn
4 RITM Rithm Capital Corp. 5.69 Bn 7.32 1.14 34.97 Bn
5 BXMT Blackstone Mortgage Trust, Inc. 3.26 Bn 30.37 6.41 15.46 Bn
6 ARR Armour Residential REIT, Inc. 1.84 Bn 35.07 15.78 16.56 Bn
7 DX Dynex Capital Inc 1.60 Bn 9.10 6.93 11.75 Bn
8 ABR Arbor Realty Trust Inc 1.50 Bn 9.82 2.84 10.40 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.95 0.83
EV to Cash from Ops. EV/CFO 48.98 -102.96
EV to Debt EV to Debt 1.20 1.31
EV to EBIT EV/EBIT 65.03 -260.73
EV to EBITDA EV/EBITDA 71.65 -16.37
EV to Free Cash Flow [EV/FCF] EV/FCF 160.75 3.47
EV to Market Cap EV to Market Cap 6.52 9.18
EV to Revenue EV/Rev 33.57 26.77
Price to Book Value [P/B] P/B 0.74 0.68
Price to Earnings [P/E] P/E 11.00 -4.85
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 0.82 -0.55
Dividend Payout Ratio % Div Payout % (Qtr) 85.20 29.47
Dividend per Basic Share Div per Share (Qtr) 0.75 1.15
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 185.64 57.60
Interest Coverage Interest Coverage 0.00 -0.17
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 13.88 37.60
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) 26.54 24.22
Dividend Growth (1y) % Div 1y % (Qtr) -42.31 4.53
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 221.47 17.83
EBITDA Growth (1y) % EBITDA 1y % (Qtr) -25.60 9.86
EBIT Growth (1y) % EBIT 1y % (Qtr) 222.20 20.98
EBT Growth (1y) % EBT 1y % (Qtr) 222.20 11.17
EPS Growth (1y) % EPS 1y % (Qtr) 194.62 59.25
FCF Growth (1y) % FCF 1y % (Qtr) 72.97 59.63
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) -15.31 20.65
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.03 0.04
Cash Payout Ratio Cash Payout (Qtr) 0.47 0.83
Cash Ratio Cash Ratio 0.00 0.00
Current Ratio Current Ratio 0.00 0.00
Debt to Equity Ratio Debt/Equity (Qtr) 4.04 5.05
Interest Cover Ratio Interest Cover Ratio 0.00 -0.17
Times Interest Earned Times Interest Earned 0.00 -0.17
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 55.40 137.11
EBIT Margin % EBIT Margin % (Qtr) 51.62 142.19
EBT Margin % EBT Margin % (Qtr) 51.62 129.16
Gross Margin % Gross Margin % (Qtr) 100.00 117.97
Net Profit Margin % Net Margin % (Qtr) 46.80 125.89