Critical Contrast: Eagle Point Credit (NYSE:ECC) & Portman Ridge Finance (NASDAQ:PTMN)

Eagle Point Credit (NYSE:ECC) and Portman Ridge Finance (NASDAQ:PTMN) are both small-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, valuation, institutional ownership, risk, profitability, dividends and analyst recommendations.

Insider and Institutional Ownership

19.5% of Eagle Point Credit shares are held by institutional investors. Comparatively, 30.1% of Portman Ridge Finance shares are held by institutional investors. 0.3% of Eagle Point Credit shares are held by insiders. Comparatively, 2.1% of Portman Ridge Finance shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Analyst Ratings

This is a breakdown of recent recommendations for Eagle Point Credit and Portman Ridge Finance, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Eagle Point Credit	0	2	3	0	2.60
Portman Ridge Finance	0	0	0	0	0.00

Eagle Point Credit currently has a consensus target price of $6.50, indicating a potential upside of 74.97%. Given Eagle Point Credit’s stronger consensus rating and higher possible upside, equities research analysts plainly believe Eagle Point Credit is more favorable than Portman Ridge Finance.

Dividends

Eagle Point Credit pays an annual dividend of $1.44 per share and has a dividend yield of 38.8%. Portman Ridge Finance pays an annual dividend of $1.88 per share and has a dividend yield of 26.6%. Eagle Point Credit pays out 151.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Portman Ridge Finance pays out -202.2% of its earnings in the form of a dividend.

Volatility & Risk

Eagle Point Credit has a beta of 0.35, indicating that its stock price is 65% less volatile than the S&P 500. Comparatively, Portman Ridge Finance has a beta of 0.6, indicating that its stock price is 40% less volatile than the S&P 500.

Valuation & Earnings

This table compares Eagle Point Credit and Portman Ridge Finance”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Eagle Point Credit	$203.99 million	2.41	-$115.00 million	$0.95	3.91
Portman Ridge Finance	-$2.85 million	-32.83	-$5.93 million	($0.93)	-7.61

Portman Ridge Finance has lower revenue, but higher earnings than Eagle Point Credit. Portman Ridge Finance is trading at a lower price-to-earnings ratio than Eagle Point Credit, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Eagle Point Credit and Portman Ridge Finance’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Eagle Point Credit	12.33%	13.47%	8.14%
Portman Ridge Finance	-15.92%	11.49%	4.54%

Summary

Eagle Point Credit beats Portman Ridge Finance on 11 of the 16 factors compared between the two stocks.

About Eagle Point Credit

Eagle Point Credit Company Inc. is a closed ended fund launched and managed by Eagle Point Credit Management LLC. It invests in fixed income markets of the United States. The fund invests equity and junior debt tranches of collateralized loan obligations consisting primarily of below investment grade U.S. senior secured loans. Eagle Point Credit Company Inc. was formed on March 24, 2014 and is domiciled in the United States.

About Portman Ridge Finance

Portman Ridge Finance Corporation is a business development company specializing in investments in unitranche loans (including last out), first lien loans, second lien loans, subordinated debt, equity co-investment, mezzanine, buyout in middle market companies. It also makes acquisitions in businesses complementary to the firm's business. It primarily invests in healthcare, cargo transport, manufacturing, industrial & environmental services, logistics & distribution, media & telecommunications, real estate, education, automotive, agriculture, aerospace/defense, packaging, electronics, finance, non-durable consumer, consumer products, business services, utilities, insurance, and food and beverage sectors. The fund typically invests $1 million to $20 million in its portfolio companies. It provides senior secured term loans from $2 million to $20 million maturing in five to seven years; second lien term loans from $5 million to $15 million maturing in six to eight years; senior unsecured loans $5 million to $23 million maturing in six to eight years; mezzanine loans from $5 million to $15 million maturing in seven to ten years; and equity investments from $1 to $5 million. The fund targets the companies with EBITDA between $5 million and $25 million. While investing in debt securities, it invests in those middle market firms with EBITDA between $10 million and $50 million and/or total debt between $25 million and $150 million. It invests in minority, and majority or control equity positions alongside its private equity sponsor partners.