Medley Capital Corporation (NYSE: MCC) and Capitala Finance Corp. (NASDAQ:CPTA) are both small-cap finance companies, but which is the better business? We will contrast the two businesses based on the strength of their dividends, risk, earnings, institutional ownership, analyst recommendations, valuation and profitabiliy.
Insider and Institutional Ownership
38.6% of Medley Capital Corporation shares are owned by institutional investors. Comparatively, 31.6% of Capitala Finance Corp. shares are owned by institutional investors. 8.7% of Medley Capital Corporation shares are owned by insiders. Comparatively, 8.4% of Capitala Finance Corp. shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.
Medley Capital Corporation pays an annual dividend of $0.64 per share and has a dividend yield of 10.0%. Capitala Finance Corp. pays an annual dividend of $1.56 per share and has a dividend yield of 11.4%. Medley Capital Corporation pays out 640.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Capitala Finance Corp. pays out 135.7% 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 Corp. is clearly the better dividend stock, given its higher yield and lower payout ratio.
This is a breakdown of current ratings and price targets for Medley Capital Corporation and Capitala Finance Corp., as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Medley Capital Corporation||0||5||0||0||2.00|
|Capitala Finance Corp.||0||5||4||0||2.44|
Medley Capital Corporation presently has a consensus target price of $7.38, indicating a potential upside of 15.60%. Capitala Finance Corp. has a consensus target price of $15.44, indicating a potential upside of 13.01%. Given Medley Capital Corporation’s higher probable upside, research analysts plainly believe Medley Capital Corporation is more favorable than Capitala Finance Corp..
Earnings & Valuation
This table compares Medley Capital Corporation and Capitala Finance Corp.’s revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Medley Capital Corporation||$106.02 million||N/A||N/A||$0.10||63.81|
|Capitala Finance Corp.||$65.68 million||N/A||N/A||$1.15||11.88|
Capitala Finance Corp. is trading at a lower price-to-earnings ratio than Medley Capital Corporation, indicating that it is currently the more affordable of the two stocks.
Volatility & Risk
Medley Capital Corporation has a beta of 1.25, indicating that its stock price is 25% more volatile than the S&P 500. Comparatively, Capitala Finance Corp. has a beta of 1.02, indicating that its stock price is 2% more volatile than the S&P 500.
This table compares Medley Capital Corporation and Capitala Finance Corp.’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Medley Capital Corporation||4.60%||8.10%||4.00%|
|Capitala Finance Corp.||27.75%||11.06%||4.72%|
Capitala Finance Corp. beats Medley Capital Corporation on 8 of the 14 factors compared between the two stocks.
About Medley Capital Corporation
Medley Capital Corporation is a non-diversified closed-end management investment company. The Company’s investment objective is to generate current income and capital appreciation by lending directly to privately-held middle market companies, primarily through directly originated transactions to help these companies expand their business, refinance and make acquisitions. Its investment portfolio includes senior secured first lien term loans, senior secured second lien term loans, unitranche, senior secured first lien notes, subordinated notes and warrants and minority equity securities. It may invest up to 100% of its assets in securities acquired directly from issuers in privately negotiated transactions. Its portfolio of investments includes industries, including banking, finance, insurance and real estate; construction and building; healthcare and pharmaceuticals; beverage and food, and telecommunications. MCC Advisors LLC is the Company’s investment advisor.
About Capitala Finance Corp.
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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