Solar Senior Capital (NASDAQ: SUNS) and Capitala Finance (NASDAQ:CPTA) are both small-cap finance companies, but which is the better business? We will contrast the two companies based on the strength of their institutional ownership, dividends, profitability, earnings, analyst recommendations, risk and valuation.
This table compares Solar Senior Capital and Capitala Finance’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Solar Senior Capital||76.43%||8.39%||4.48%|
This table compares Solar Senior Capital and Capitala Finance’s gross revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Solar Senior Capital||$27.20 million||9.94||$24.25 million||$1.44||11.71|
|Capitala Finance||$68.31 million||1.72||$9.15 million||$0.11||67.18|
Solar Senior Capital has higher earnings, but lower revenue than Capitala Finance. Solar Senior Capital is trading at a lower price-to-earnings ratio than Capitala Finance, indicating that it is currently the more affordable of the two stocks.
Solar Senior Capital pays an annual dividend of $1.41 per share and has a dividend yield of 8.4%. Capitala Finance pays an annual dividend of $1.00 per share and has a dividend yield of 13.5%. Solar Senior Capital pays out 97.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Capitala Finance pays out 909.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.
This is a summary of current recommendations and price targets for Solar Senior Capital and Capitala Finance, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Solar Senior Capital||0||0||1||0||3.00|
Solar Senior Capital presently has a consensus target price of $18.50, suggesting a potential upside of 9.73%. Capitala Finance has a consensus target price of $13.50, suggesting a potential upside of 82.68%. Given Capitala Finance’s higher probable upside, analysts clearly believe Capitala Finance is more favorable than Solar Senior Capital.
Volatility and Risk
Solar Senior Capital has a beta of 0.61, indicating that its stock price is 39% less volatile than the S&P 500. Comparatively, Capitala Finance has a beta of 1.01, indicating that its stock price is 1% more volatile than the S&P 500.
Insider & Institutional Ownership
29.7% of Solar Senior Capital shares are owned by institutional investors. Comparatively, 18.2% of Capitala Finance shares are owned by institutional investors. 5.6% of Solar Senior Capital shares are owned by insiders. Comparatively, 8.4% of Capitala Finance shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.
Solar Senior Capital beats Capitala Finance on 9 of the 15 factors compared between the two stocks.
Solar Senior Capital Company Profile
Solar Senior Capital Ltd. is a closed-end, externally managed, non-diversified management investment company. The Company’s investment objective is to seek to maximize current income consistent with the preservation of capital. The Company seeks to achieve its investment objective by directly and indirectly investing in senior loans, including first lien, unitranche, and second lien debt instruments, made to private middle-market companies whose debt is rated below investment grade, which it refers to collectively as senior loans. It may also invest in debt of public companies that are thinly traded or in equity securities. Under normal market conditions, at least 80% of the value of its net assets (including the amount of any borrowings for investment purposes) will be invested in senior loans. It invests in privately held the United States middle-market companies. Its investment activities are managed by Solar Capital Partners, LLC (Solar Capital Partners or the Investment Advisor).
Capitala Finance Company Profile
Capitala Finance Corp. is an externally managed non-diversified, closed-end management investment company. The Company’s investment objective is to generate both current income and capital appreciation through debt and equity investments. Both directly and through its subsidiaries that are licensed by the United States Small Business Administration (SBA), the Company offers financing to business owners, management teams and financial sponsors for change of ownership transactions, recapitalizations, strategic acquisitions, business expansion and other growth initiatives. The Company provides capital to lower and traditional middle-market companies in the United States, with a non-exclusive emphasis on the Southeast, Southwest and Mid-Atlantic regions. The Company invests in first lien, second lien and subordinated loans. The Company’s investment advisor is Capitala Investment Advisors, LLC.
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