Financial Analysis: Jefferies Financial Group (NYSE:JEF) versus Stellus Capital Investment (NYSE:SCM)

Stellus Capital Investment (NYSE:SCM) and Jefferies Financial Group (NYSE:JEF) are both finance companies, but which is the better investment? We will compare the two companies based on the strength of their risk, valuation, dividends, analyst recommendations, earnings, profitability and institutional ownership.

Volatility & Risk

Stellus Capital Investment has a beta of 0.71, indicating that its stock price is 29% less volatile than the S&P 500. Comparatively, Jefferies Financial Group has a beta of 1.57, indicating that its stock price is 57% more volatile than the S&P 500.

Dividends

Stellus Capital Investment pays an annual dividend of $1.00 per share and has a dividend yield of 14.0%. Jefferies Financial Group pays an annual dividend of $1.60 per share and has a dividend yield of 3.6%. Stellus Capital Investment pays out 98.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Jefferies Financial Group pays out 43.8% of its earnings in the form of a dividend. Jefferies Financial Group has increased its dividend for 2 consecutive years.

Earnings & Valuation

This table compares Stellus Capital Investment and Jefferies Financial Group”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Stellus Capital Investment	$102.14 million	2.00	$27.05 million	$1.02	7.02
Jefferies Financial Group	$10.82 billion	0.79	$710.47 million	$3.65	12.16

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

Analyst Ratings

This is a summary of current recommendations for Stellus Capital Investment and Jefferies Financial Group, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Stellus Capital Investment	1	2	1	0	2.00
Jefferies Financial Group	0	5	2	0	2.29

Stellus Capital Investment presently has a consensus target price of $9.25, suggesting a potential upside of 29.19%. Jefferies Financial Group has a consensus target price of $56.86, suggesting a potential upside of 28.07%. Given Stellus Capital Investment’s higher possible upside, research analysts clearly believe Stellus Capital Investment is more favorable than Jefferies Financial Group.

Institutional & Insider Ownership

13.2% of Stellus Capital Investment shares are held by institutional investors. Comparatively, 60.9% of Jefferies Financial Group shares are held by institutional investors. 4.2% of Stellus Capital Investment shares are held by company insiders. Comparatively, 19.9% of Jefferies Financial Group shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Profitability

This table compares Stellus Capital Investment and Jefferies Financial Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Stellus Capital Investment	30.66%	9.09%	3.32%
Jefferies Financial Group	7.50%	9.26%	1.29%

Summary

Jefferies Financial Group beats Stellus Capital Investment on 12 of the 17 factors compared between the two stocks.

About Stellus Capital Investment

Stellus Capital Investment Corporation is a business development company specializing in investments in private middle-market companies. It invests through first lien, second lien, unitranche, and mezzanine debt financing, often with a corresponding equity investment. The fund prefers to invest in US and Canada. The fund seeks to invest in companies with an EBITDA between $5 million and $50 million.

About Jefferies Financial Group

Jefferies Financial Group Inc. operates as an investment banking and capital markets firm in the Americas, Europe, the Middle East, and the Asia-Pacific. The company operates in two segments, Investment Banking and Capital Markets, and Asset Management. It provides investment banking, advisory services with respect to mergers or acquisitions, debt financing, restructurings or recapitalizations, and private capital advisory transactions; underwriting and placement services related to corporate debt, municipal bonds, mortgage-backed and asset-backed securities, equity and equity-linked securities, and loan syndication services; and corporate lending services. The company also offers financing, securities lending, and other prime brokerage services; equities research, sales, and trading services; wealth management services; and online foreign exchange trading services. In addition, it provides investment grade distressed debt securities, U.S. and European government and agency securities, municipal bonds, leveraged loans, emerging markets debt, and interest rate and credit index derivative products; and manages and offers services to a diverse group of alternative asset management platforms across a spectrum of investment strategies and asset classes. The company was formerly known as Leucadia National Corporation and changed its name to Jefferies Financial Group Inc. in May 2018. Jefferies Financial Group Inc. was founded in 1962 and is headquartered in New York, New York.