Contrasting Service Properties Trust (NASDAQ:SVC) & Summit Hotel Properties (NYSE:INN)

Summit Hotel Properties (NYSE:INN) and Service Properties Trust (NASDAQ:SVC) are both small-cap real estate companies, but which is the better investment? We will compare the two companies based on the strength of their valuation, institutional ownership, profitability, earnings, dividends, risk and analyst recommendations.

Valuation and Earnings

This table compares Summit Hotel Properties and Service Properties Trust”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Summit Hotel Properties	$729.47 million	1.06	-$7.69 million	($0.23)	-31.11
Service Properties Trust	$1.66 billion	0.49	-$202.32 million	($7.70)	-0.81

Summit Hotel Properties has higher earnings, but lower revenue than Service Properties Trust. Summit Hotel Properties is trading at a lower price-to-earnings ratio than Service Properties Trust, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Summit Hotel Properties has a beta of 1.27, indicating that its share price is 27% more volatile than the S&P 500. Comparatively, Service Properties Trust has a beta of 1.72, indicating that its share price is 72% more volatile than the S&P 500.

Dividends

Summit Hotel Properties pays an annual dividend of $0.32 per share and has a dividend yield of 4.5%. Service Properties Trust pays an annual dividend of $0.20 per share and has a dividend yield of 3.2%. Summit Hotel Properties pays out -139.1% of its earnings in the form of a dividend. Service Properties Trust pays out -2.6% 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. Summit Hotel Properties has increased its dividend for 2 consecutive years. Summit Hotel Properties is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Summit Hotel Properties and Service Properties Trust’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Summit Hotel Properties	-0.99%	-0.60%	-0.26%
Service Properties Trust	-25.44%	-65.18%	-6.66%

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Summit Hotel Properties and Service Properties Trust, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Summit Hotel Properties	2	1	2	0	2.00
Service Properties Trust	1	2	3	0	2.33

Summit Hotel Properties currently has a consensus target price of $5.40, indicating a potential downside of 24.53%. Service Properties Trust has a consensus target price of $12.05, indicating a potential upside of 92.62%. Given Service Properties Trust’s stronger consensus rating and higher probable upside, analysts clearly believe Service Properties Trust is more favorable than Summit Hotel Properties.

Insider & Institutional Ownership

96.5% of Summit Hotel Properties shares are owned by institutional investors. Comparatively, 77.6% of Service Properties Trust shares are owned by institutional investors. 4.3% of Summit Hotel Properties shares are owned by insiders. Comparatively, 1.6% of Service Properties Trust shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Summary

Summit Hotel Properties beats Service Properties Trust on 11 of the 17 factors compared between the two stocks.

About Summit Hotel Properties

Summit Hotel Properties, Inc. is a publicly traded real estate investment trust focused on owning premium-branded lodging properties with efficient operating models primarily in the upscale segment of the lodging industry. As of November 1, 2023, the Company’s portfolio consisted of 101 assets, 57 of which are wholly owned, with a total of 15,035 guestrooms located in 24 states.

About Service Properties Trust

Service Properties Trust (Nasdaq: SVC) is a real estate investment trust with over $11 billion invested in two asset categories: hotels and service-focused retail net lease properties. As of December 31, 2023, SVC owned 221 hotels with over 37,000 guest rooms throughout the United States and in Puerto Rico and Canada, the majority of which are extended stay and select service. As of December 31, 2023, SVC also owned 752 service-focused retail net lease properties totaling approximately 13.3 million square feet throughout the United States. SVC is managed by The RMR Group (Nasdaq: RMR), a leading U.S. alternative asset management company with over $41 billion in assets under management as of December 31, 2023, and more than 35 years of institutional experience in buying, selling, financing and operating commercial real estate. SVC is headquartered in Newton, MA.