Solar Capital (SLRC) and Nasdaq (NDAQ) Financial Review

Nasdaq (NASDAQ: NDAQ) and Solar Capital (NASDAQ:SLRC) are both finance companies, but which is the better investment? We will compare the two companies based on the strength of their earnings, valuation, institutional ownership, risk, profitabiliy, analyst recommendations and dividends.

Profitability

This table compares Nasdaq and Solar Capital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Nasdaq 3.87% 11.77% 4.47%
Solar Capital 62.94% 7.70% 4.16%

Insider & Institutional Ownership

74.9% of Nasdaq shares are owned by institutional investors. Comparatively, 63.1% of Solar Capital shares are owned by institutional investors. 1.6% of Nasdaq shares are owned by insiders. Comparatively, 5.9% of Solar Capital shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Dividends

Nasdaq pays an annual dividend of $1.52 per share and has a dividend yield of 2.1%. Solar Capital pays an annual dividend of $1.60 per share and has a dividend yield of 7.3%. Nasdaq pays out 183.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Solar Capital pays out 70.5% of its earnings in the form of a dividend. Solar Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk & Volatility

Nasdaq has a beta of 0.76, meaning that its share price is 24% less volatile than the S&P 500. Comparatively, Solar Capital has a beta of 0.57, meaning that its share price is 43% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings and target prices for Nasdaq and Solar Capital, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Nasdaq 0 5 3 0 2.38
Solar Capital 0 4 3 0 2.43

Nasdaq presently has a consensus target price of $72.88, suggesting a potential upside of 2.41%. Solar Capital has a consensus target price of $22.40, suggesting a potential upside of 2.85%. Given Solar Capital’s stronger consensus rating and higher possible upside, analysts clearly believe Solar Capital is more favorable than Nasdaq.

Earnings and Valuation

This table compares Nasdaq and Solar Capital’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Nasdaq $3.77 billion 3.12 $1.19 billion $0.83 85.74
Solar Capital $152.20 million N/A N/A $2.27 9.59

Nasdaq has higher revenue and earnings than Solar Capital. Solar Capital is trading at a lower price-to-earnings ratio than Nasdaq, indicating that it is currently the more affordable of the two stocks.

Summary

Solar Capital beats Nasdaq on 7 of the 13 factors compared between the two stocks.

About Nasdaq

Nasdaq, Inc. (Nasdaq) is a holding company. The Company is a provider of trading, clearing, exchange technology, regulatory, securities listing, information and public company services. It manages, operates and provides its products and services through four segments: Market Services, Corporate Services, Information Services and Market Technology. Its global offerings include trading and clearing across various asset classes, trade management services, data products, financial indexes, capital formation solutions, corporate solutions, and market technology products and services. Its technology markets across the globe, supporting equity derivative trading, clearing and settlement, cash equity trading, fixed income trading and various other functions. Its Market Services segment include its equity derivative trading and clearing, cash equity trading, fixed income clearing corporation and trade management services businesses. Its Corporate Solutions business serves corporate clients.

About Solar Capital

Solar Capital Ltd. is a closed-end, externally managed, non-diversified management investment company. The Company’s investment objective is to generate both current income and capital appreciation through debt and equity investments. It invests in privately held the United States middle market companies. It invests in leveraged middle market companies in the form of senior secured loans, unitranche loans, mezzanine loans and equity securities. It may also invest in public companies that are thinly traded. Its business is focused primarily on the direct origination of investments through portfolio companies or their financial sponsors. Its investments generally range between $5 million and $100 million each. In addition, the Company may invest a portion of its portfolio in other types of investments, which it refers to as opportunistic investments. The Company’s investment activities are managed by Solar Capital Partners, LLC (Solar Capital Partners or the Investment Advisor).

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