Comparing Main Street Capital (NYSE:MAIN) & Del Taco Restaurants (NYSE:TACO)

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Main Street Capital (NYSE:MAIN) and Del Taco Restaurants (NASDAQ:TACO) are both finance companies, but which is the better investment? We will compare the two businesses based on the strength of their risk, valuation, analyst recommendations, institutional ownership, earnings, dividends and profitability.

Dividends

Main Street Capital pays an annual dividend of $2.46 per share and has a dividend yield of 5.7%. Del Taco Restaurants does not pay a dividend. Main Street Capital pays out 94.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Main Street Capital has raised its dividend for 8 consecutive years.

Risk and Volatility

Main Street Capital has a beta of 0.85, indicating that its share price is 15% less volatile than the S&P 500. Comparatively, Del Taco Restaurants has a beta of 0.24, indicating that its share price is 76% less volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings and recommmendations for Main Street Capital and Del Taco Restaurants, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Main Street Capital 0 2 1 0 2.33
Del Taco Restaurants 0 1 4 0 2.80

Main Street Capital presently has a consensus price target of $38.00, indicating a potential downside of 12.02%. Del Taco Restaurants has a consensus price target of $14.60, indicating a potential upside of 33.09%. Given Del Taco Restaurants’ stronger consensus rating and higher possible upside, analysts clearly believe Del Taco Restaurants is more favorable than Main Street Capital.

Earnings and Valuation

This table compares Main Street Capital and Del Taco Restaurants’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Main Street Capital $233.35 million 11.68 $168.21 million $2.60 16.61
Del Taco Restaurants $505.49 million 0.80 $18.96 million $0.56 19.59

Main Street Capital has higher earnings, but lower revenue than Del Taco Restaurants. Main Street Capital is trading at a lower price-to-earnings ratio than Del Taco Restaurants, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

22.1% of Main Street Capital shares are held by institutional investors. Comparatively, 80.8% of Del Taco Restaurants shares are held by institutional investors. 5.4% of Main Street Capital shares are held by insiders. Comparatively, 16.4% of Del Taco Restaurants shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Profitability

This table compares Main Street Capital and Del Taco Restaurants’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Main Street Capital 65.74% 10.57% 6.18%
Del Taco Restaurants 2.94% 4.62% 2.28%

Summary

Main Street Capital beats Del Taco Restaurants on 9 of the 17 factors compared between the two stocks.

About Main Street Capital

Main Street Capital Corporation is a business development company specializing in long- term equity and debt investments in small and lower middle market companies. The firm focuses on investments in, subordinated loans, private equity, venture debt, mezzanine investments, mature, mid venture, industry consolidation, later stage, late venture, emerging growth, management buyouts, change of control transactions, ownership transitions, recapitalizations, strategic acquisitions, refinancing, business expansion capital, growth financings, family estate planning, and other growth initiatives primarily for later stage businesses. It invests in consumer discretionary, consumer staples, energy, healthcare, industrials, information technology, manufacturing, media, materials, telecommunication services, and utilities sectors. It does not seek to invest in start-up companies or companies with speculative business plans. It seeks to invest in traditional or basic businesses. The firm primarily invests in companies based in the Southern, South Central, and Southwestern regions of the United States but also considers other domestic investment opportunities. It typically invests between $2 million and $75 million in equity and $5 million to $50 million in debt, revenue between $10 million and $150 million, enterprise value between $3 million and $50 million, and EBITDA between $1 million and $20 million. The firm seeks to charge a fixed interest rate between 12 percent and 14 percent, payable in cash, in case of its mezzanine loan investments. The firm typically invests in the form of term debt with equity participation and/or direct equity investments. It prefers to maintain fully diluted minority and majority equity positions in its portfolio companies of 5 percent to 50 percent, and may have controlling interests in some instances. The firm also co-invests with other investment firms. It seeks to exit its debt investments through the repayment of the investment from internally generated cash flow and/or refinancing within a period of three to seven years. It participates in warrants, PIK (Payment in Kind) interest, convertible securities, junior secured or unsecured, senior secured debt, unitranche debt, equity related, common equity, and preferred equity. Main Street Capital Corporation was incorporated on March 9, 2007 and is based at Houston, Texas.

About Del Taco Restaurants

Del Taco Restaurants, Inc. develops, franchises, owns, and operates Del Taco quick-service Mexican-American restaurants in the United States. The company's restaurants offer Mexican inspired and American classic dishes. As of December 10, 2018, it operated approximately 560 restaurants across 14 states. The company was founded in 1964 and is headquartered in Lake Forest, California.

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