Analyzing PennantPark Investment Corporation (PNNT) and Capitala Finance Corp. (CPTA)
PennantPark Investment Corporation (NASDAQ: PNNT) and Capitala Finance Corp. (NASDAQ:CPTA) are both finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their valuation, earnings, analyst recommendations, risk, dividends, institutional ownership and profitability.
Risk & Volatility
PennantPark Investment Corporation has a beta of 1.26, suggesting that its stock price is 26% more volatile than the S&P 500. Comparatively, Capitala Finance Corp. has a beta of 1.02, suggesting that its stock price is 2% more volatile than the S&P 500.
This table compares PennantPark Investment Corporation and Capitala Finance Corp.’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|PennantPark Investment Corporation||53.92%||9.11%||4.72%|
|Capitala Finance Corp.||8.91%||8.55%||3.66%|
Insider and Institutional Ownership
43.8% of PennantPark Investment Corporation shares are held by institutional investors. Comparatively, 28.3% of Capitala Finance Corp. shares are held by institutional investors. 1.9% of PennantPark Investment Corporation shares are held by company insiders. Comparatively, 8.4% of Capitala Finance Corp. shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.
This is a summary of current ratings and price targets for PennantPark Investment Corporation and Capitala Finance Corp., as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|PennantPark Investment Corporation||0||7||2||0||2.22|
|Capitala Finance Corp.||0||5||3||0||2.38|
PennantPark Investment Corporation currently has a consensus price target of $8.07, suggesting a potential upside of 5.79%. Capitala Finance Corp. has a consensus price target of $15.32, suggesting a potential upside of 66.72%. Given Capitala Finance Corp.’s stronger consensus rating and higher probable upside, analysts plainly believe Capitala Finance Corp. is more favorable than PennantPark Investment Corporation.
Valuation and Earnings
This table compares PennantPark Investment Corporation and Capitala Finance Corp.’s revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|PennantPark Investment Corporation||N/A||N/A||N/A||$0.97||7.87|
|Capitala Finance Corp.||N/A||N/A||N/A||$0.34||27.03|
PennantPark Investment Corporation is trading at a lower price-to-earnings ratio than Capitala Finance Corp., indicating that it is currently the more affordable of the two stocks.
PennantPark Investment Corporation pays an annual dividend of $0.72 per share and has a dividend yield of 9.4%. Capitala Finance Corp. pays an annual dividend of $1.56 per share and has a dividend yield of 17.0%. PennantPark Investment Corporation pays out 74.2% of its earnings in the form of a dividend. Capitala Finance Corp. pays out 458.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.
PennantPark Investment Corporation beats Capitala Finance Corp. on 7 of the 12 factors compared between the two stocks.
PennantPark Investment Corporation Company Profile
PennantPark Investment Corporation is a closed-end, non-diversified investment company. The Company is a business development company. Its objectives are to generate both current income and capital appreciation while seeking to preserve capital through debt and equity investments primarily made to the United States middle-market companies in the form of senior secured debt, mezzanine debt and equity investments. The Company’s debt investments may generally range in maturity from 3 to 10 years and, are made to the United States and to a limited extent, non-United States corporations, partnerships and other business entities, which operate in various industries and geographical regions. In addition, it may invest up to approximately 30% of its portfolio in non-qualifying assets. It invests in sectors, such as aerospace and defense; energy/utilities; auto sector; environmental services, and beverage, among others. PennantPark Investment Advisers, LLC is the Company’s investment advisor.
Capitala Finance Corp. Company Profile
Capitala Finance Corp. is an externally managed non-diversified, closed-end management investment company. The Company’s investment objective is to generate both current income and capital appreciation through debt and equity investments. Both directly and through its subsidiaries that are licensed by the United States Small Business Administration (SBA), the Company offers financing to business owners, management teams and financial sponsors for change of ownership transactions, recapitalizations, strategic acquisitions, business expansion and other growth initiatives. The Company provides capital to lower and traditional middle-market companies in the United States, with a non-exclusive emphasis on the Southeast, Southwest and Mid-Atlantic regions. The Company invests in first lien, second lien and subordinated loans. The Company’s investment advisor is Capitala Investment Advisors, LLC.
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