Critical Comparison: Duke Realty Corporation (DRE) vs. CubeSmart (CUBE)

Duke Realty Corporation (NYSE:DRE) and CubeSmart (NYSE:CUBE) are the two most active stocks in the REIT – Industrial industry based on today’s trading volumes. To determine if one is a better investment than the other, we will compare the two companies’ growth, profitability, risk, return, and valuation characteristics, as well as their analyst ratings and sentiment signals.


One of the key things investors look for in a company is the ability to grow earnings at a high compound rate over time. Analysts expect DRE to grow earnings at a 6.00% annual rate over the next 5 years. Comparatively, CUBE is expected to grow at a 6.00% annual rate. All else equal, All else equal, the two stocks’ identical expected growth rates would imply a similar potential for capital appreciation..

Profitability and Returns

A high growth rate isn’t necessarily valuable to investors. In fact, companies that overinvest in low return projects just to achieve a high growth rate can actually destroy shareholder value. Profitability and returns are a measure of the quality of a company’s business and its growth opportunities. We’ll use EBITDA margin and Return on Investment (ROI) to measure this. Duke Realty Corporation (DRE) has an EBITDA margin of 91.72%, compared to an EBITDA margin of 30.56% for CubeSmart (CUBE). This suggests that DRE underlying business is more profitable. DRE’s ROI is 6.90% while CUBE has a ROI of 4.40%. The interpretation is that DRE’s business generates a higher return on investment than CUBE’s.

Cash Flow 

The amount of free cash flow available to investors is ultimately what determines the value of a stock. DRE’s free cash flow (“FCF”) per share for the trailing twelve months was +0.42. Comparatively, CUBE’s free cash flow per share was +0.13. On a percent-of-sales basis, DRE’s free cash flow was 0.02% while CUBE converted 0% of its revenues into cash flow. This means that, for a given level of sales, DRE is able to generate more free cash flow for investors.

Liquidity and Financial Risk

Liquidity and leverage ratios are important because they reveal the financial health of a company. DRE’s debt-to-equity ratio is 0.50 versus a D/E of 1.00 for CUBE. CUBE is therefore the more solvent of the two companies, and has lower financial risk.


DRE trades at a forward P/E of 81.23, a P/B of 2.24, and a P/S of 12.62, compared to a forward P/E of 36.21, a P/B of 2.89, and a P/S of 8.74 for CUBE. DRE is the cheaper of the two stocks on book value basis but is expensive in terms of P/E and P/S ratio. Given that earnings are what matter most to investors, analysts tend to place a greater weight on the P/E.

Analyst Price Targets and Opinions

Just because a stock is cheaper doesn’t mean there’s more value to be had. In order to assess value we need to compare the current price to where it’s likely to trade in the future. DRE is currently priced at a -3.33% to its one-year price target of $30.00. Comparatively, CUBE is -5.01% relative to its price target of $27.33. This suggests that CUBE is the better investment over the next year.

The average investment recommendation on a scale of 1 to 5 (1 being a strong buy, 3 a hold, and 5 a sell) is 2.50 for DRE and 2.60 for CUBE, which implies that analysts are more bullish on the outlook for CUBE.

Risk and Volatility

Analyst use beta to measure a stock’s volatility relative to the overall market. Stocks with a beta above 1 tend to have bigger swings in price than the market as a whole, the opposite being the case for stocks with a beta below 1. DRE has a beta of 0.93 and CUBE’s beta is 0.21. CUBE’s shares are therefore the less volatile of the two stocks.

Insider Activity and Investor Sentiment

Short interest is another tool that analysts use to gauge investor sentiment. It represents the percentage of a stock’s tradable shares that are being shorted. DRE has a short ratio of 1.75 compared to a short interest of 8.61 for CUBE. This implies that the market is currently less bearish on the outlook for DRE.


Duke Realty Corporation (NYSE:DRE) beats CubeSmart (NYSE:CUBE) on a total of 8 of the 13 factors compared between the two stocks. DRE is more profitable, generates a higher return on investment, has higher cash flow per share, has a higher cash conversion rate and has lower financial risk. Finally, DRE has better sentiment signals based on short interest.

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