Contrasting StepStone Group (NASDAQ:STEP) & SLR Investment (NASDAQ:SLRC)

SLR Investment (NASDAQ:SLRC) and StepStone Group (NASDAQ:STEP) are both finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their valuation, profitability, risk, institutional ownership, earnings, dividends and analyst recommendations.

Profitability

This table compares SLR Investment and StepStone Group’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
SLR Investment	35.20%	7.96%	3.09%
StepStone Group	-30.53%	43.38%	4.40%

Analyst Recommendations

This is a summary of current ratings and target prices for SLR Investment and StepStone Group, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
SLR Investment	2	4	2	0	2.00
StepStone Group	1	2	8	0	2.64

SLR Investment presently has a consensus target price of $14.10, suggesting a potential upside of 25.22%. StepStone Group has a consensus target price of $67.22, suggesting a potential upside of 54.64%. Given StepStone Group’s stronger consensus rating and higher probable upside, analysts clearly believe StepStone Group is more favorable than SLR Investment.

Valuation & Earnings

This table compares SLR Investment and StepStone Group”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
SLR Investment	$218.54 million	2.81	$92.54 million	$1.35	8.34
StepStone Group	$1.99 billion	2.60	-$535.81 million	($7.72)	-5.63

SLR Investment has higher earnings, but lower revenue than StepStone Group. StepStone Group is trading at a lower price-to-earnings ratio than SLR Investment, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

SLR Investment has a beta of 0.69, suggesting that its share price is 31% less volatile than the S&P 500. Comparatively, StepStone Group has a beta of 1.29, suggesting that its share price is 29% more volatile than the S&P 500.

Dividends

SLR Investment pays an annual dividend of $1.24 per share and has a dividend yield of 11.0%. StepStone Group pays an annual dividend of $1.32 per share and has a dividend yield of 3.0%. SLR Investment pays out 91.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. StepStone Group pays out -17.1% of its earnings in the form of a dividend. StepStone Group has raised its dividend for 3 consecutive years.

Institutional & Insider Ownership

35.3% of SLR Investment shares are owned by institutional investors. Comparatively, 55.5% of StepStone Group shares are owned by institutional investors. 9.1% of SLR Investment shares are owned by company insiders. Comparatively, 15.7% of StepStone Group shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Summary

StepStone Group beats SLR Investment on 11 of the 17 factors compared between the two stocks.

About SLR Investment

SLR Investment Corp. is a business development company specializing in secured debt (first lien unitranche and second lien), subordinated (unsecured) debt, minority equity, leveraged buyouts, acquisitions, recapitalizations, general refinancing, growth capital and strategic income-oriented control equity investments in leveraged middle market companies. The fund invests in aerospace and defense; air freight & logistics; asset management; automotive; banking; beverage, food and tobacco; building products; buildings and real estate; broadcasting and entertainment; cargo transport; commercial services and supplies; communications equipment; chemicals, plastics and rubber; containers, packaging and glass; construction & engineering; diversified/conglomerate manufacturing; consumer Finance; distributors; diversified/conglomerate services; diversified financial services; diversified real estate activities; food products; Footwear; Education Services; diversified telecommunications services; electronics; farming and agriculture; finance; grocery; health care equipment and supplies; health care facilities; education and childcare; home and office furnishing, durable consumer products; hotels, motels, inns and gaming; insurance; restaurants, leisure, amusement, and entertainment; leisure equipment tolls and services, media, multiline retail, multi sector holdings; paper and forest products; personal products; professional services, research and consulting services, software; specialty retail; textiles apparel and luxury goods, thrifts and mortgage finance, trading companies and distributors, utilities, and wireless telecommunication services; industrial conglomerates; internet software and services, IT services, machinery; mining, steel, iron, and non-precious metals; oil and gas; personal, food and miscellaneous services; printing and publishing; retail stores; telecommunications; textiles and leather; and utilities. It also invests in life sciences with focus on specialty pharmaceuticals, medical devices, biotech, health Care Providers and services; health Care technology, enabling technologies and tools. The fund primarily invests in United States. The fund’s investments generally range between $5 million and $100 million. The fund invests in companies with revenues between $50 million and $1 billion and EBITDA between $15 million and $100 million. It invests in the form of senior secured loans, mezzanine loans, and equity securities. It may also seek investments in thinly traded public companies and also make secondary investments. The fund makes non-control equity investments. It primarily exits within three years of the initial capital commitment.

About StepStone Group

StepStone Group Inc. is a private equity and venture capital firm specializing in direct, fund of funds, secondary direct, and secondary indirect investments. For direct investment, it seeks to invest in private debt, venture debt, incubation, mezzanine, distressed/vulture, seed/startup, early venture, mid venture, late venture, emerging growth, later stage, turnaround, growth capital, industry consolidation, recapitalization, buyout investments in mature and middle market companies. It prefers to invest in natural resources, technology, healthcare, services, materials, manufacturing, consumer durables, apparel, hotels, restaurants and leisure, media, retailing, power, utilities consumer staples, financials, telecommunication services, clean energy/renewables, transport, social, natural capital, infrastructure, corporate, real estate, credit and real asset. The firm invests globally with a focus on United States, North America, Europe, Asia, Latin America, Middle East, Africa, Brazil, Mexico, Argentina, Colombia, New Zealand, China, India, Korea, Japan, Taiwan, and Australia region. The firm invests between 5% and 40% in emerging markets. For fund of fund investment, it seeks to invest in private equity funds, venture capital funds, Special situation funds, Real estate funds, Infrastructure funds, mezzanine funds, and turnaround/distressed funds. It considers investments in both domestic and international funds. It also seeks to make co-investments and follow-on investments and considers partial interests in funds. StepStone Group Inc. was founded in 2007 and is based in New York, New York with additional offices across North America, South America, Europe, Australia and Asia.