Liberty All-Star Equity Fund (NYSE: USA) and Alcentra Capital (NASDAQ:ABDC) are both small-cap financials companies, but which is the better stock? We will contrast the two businesses based on the strength of their valuation, dividends, earnings, risk, profitability, analyst recommendations and institutional ownership.

Insider and Institutional Ownership

27.2% of Liberty All-Star Equity Fund shares are owned by institutional investors. Comparatively, 31.6% of Alcentra Capital shares are owned by institutional investors. 0.1% of Liberty All-Star Equity Fund shares are owned by company insiders. Comparatively, 5.0% of Alcentra Capital shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Liberty All-Star Equity Fund and Alcentra Capital, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Liberty All-Star Equity Fund 0 0 0 0 N/A
Alcentra Capital 2 1 1 0 1.75

Alcentra Capital has a consensus price target of $12.83, indicating a potential upside of 61.83%. Given Alcentra Capital’s higher possible upside, analysts clearly believe Alcentra Capital is more favorable than Liberty All-Star Equity Fund.

Profitability

This table compares Liberty All-Star Equity Fund and Alcentra Capital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Liberty All-Star Equity Fund N/A N/A N/A
Alcentra Capital -2.25% 11.32% 7.03%

Dividends

Liberty All-Star Equity Fund pays an annual dividend of $0.13 per share and has a dividend yield of 2.1%. Alcentra Capital pays an annual dividend of $1.36 per share and has a dividend yield of 17.2%. Alcentra Capital pays out -2,719.5% of its earnings in the form of a dividend.

Volatility & Risk

Liberty All-Star Equity Fund has a beta of 1.24, suggesting that its share price is 24% more volatile than the S&P 500. Comparatively, Alcentra Capital has a beta of 0.68, suggesting that its share price is 32% less volatile than the S&P 500.

Earnings and Valuation

This table compares Liberty All-Star Equity Fund and Alcentra Capital’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Liberty All-Star Equity Fund N/A N/A N/A N/A N/A
Alcentra Capital $40.60 million 2.78 $8.78 million ($0.05) -158.57

Alcentra Capital has higher revenue and earnings than Liberty All-Star Equity Fund.

Summary

Alcentra Capital beats Liberty All-Star Equity Fund on 9 of the 11 factors compared between the two stocks.

About Liberty All-Star Equity Fund

Liberty All-Star Equity Fund is a diversified, closed-end management investment fund. The Fund seeks total investment return comprising long-term capital appreciation and current income through investing primarily in a diversified portfolio of equity securities. It allocates its portfolio assets on an approximately equal basis among several independent investment management organizations having various investment styles recommended and monitored by its investment advisor. It invests at least 80% of its net assets in a diversified portfolio of equity securities. The Fund invests in various sectors, including financials, information technology, healthcare, consumer discretionary, consumer staples, industrials, energy, materials, real estate, utilities and telecommunication services. Its investment managers invest primarily for pension funds, endowments, foundations and other institutions. The Fund’s investment advisor is ALPS Advisors, Inc.

About Alcentra Capital

Alcentra Capital Corporation is a specialty finance company that operates as a non-diversified, closed-end management investment company. The Company operates as a business development company and a regulated investment company. It provides customized debt and equity financing solutions to lower middle-market companies, which are companies having annual earnings, before interest, taxes, depreciation and amortization of between $5 million and $15 million, and/or revenues of between $10 million and $100 million. Its investments range in size from $5 million to $15 million. Its investment objective is to generate both current income and capital appreciation primarily by making direct investments in lower middle-market companies in the form of senior debt, unitranche, second lien, subordinated debt and, to a lesser extent, senior debt and minority equity investments. Its investment focus is to make loans to, and selected equity investments in, privately-held lower-middle-market companies.

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