Comparing Rand Capital (NASDAQ:RAND) & Runway Growth Finance (NASDAQ:RWAY)

Runway Growth Finance (NASDAQ:RWAY) and Rand Capital (NASDAQ:RAND) are both small-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their dividends, valuation, earnings, institutional ownership, risk, analyst recommendations and profitability.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Runway Growth Finance and Rand Capital, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Runway Growth Finance	0	4	3	0	2.43
Rand Capital	1	0	0	0	1.00

Runway Growth Finance currently has a consensus price target of $11.10, suggesting a potential upside of 24.30%. Given Runway Growth Finance’s stronger consensus rating and higher probable upside, analysts plainly believe Runway Growth Finance is more favorable than Rand Capital.

Insider & Institutional Ownership

64.6% of Runway Growth Finance shares are held by institutional investors. 1.0% of Runway Growth Finance shares are held by insiders. Comparatively, 68.2% of Rand Capital shares are held by 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.

Dividends

Runway Growth Finance pays an annual dividend of $1.32 per share and has a dividend yield of 14.8%. Rand Capital pays an annual dividend of $1.16 per share and has a dividend yield of 10.4%. Runway Growth Finance pays out 89.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Rand Capital pays out -27.6% of its earnings in the form of a dividend.

Profitability

This table compares Runway Growth Finance and Rand Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Runway Growth Finance	38.92%	11.94%	5.80%
Rand Capital	-164.74%	7.12%	6.80%

Earnings and Valuation

This table compares Runway Growth Finance and Rand Capital”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Runway Growth Finance	$144.63 million	2.23	$73.61 million	$1.47	6.07
Rand Capital	$8.56 million	3.87	$8.83 million	($4.20)	-2.66

Runway Growth Finance has higher revenue and earnings than Rand Capital. Rand Capital is trading at a lower price-to-earnings ratio than Runway Growth Finance, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Runway Growth Finance has a beta of 0.67, indicating that its stock price is 33% less volatile than the S&P 500. Comparatively, Rand Capital has a beta of 0.31, indicating that its stock price is 69% less volatile than the S&P 500.

Summary

Runway Growth Finance beats Rand Capital on 12 of the 16 factors compared between the two stocks.

About Runway Growth Finance

Runway Growth Finance Corp. is a business development company specializing investments in senior-secured loans to late stage and growth companies. It prefers to make investments in companies engaged in the technology, life sciences, healthcare and information services, business services and select consumer services and products sectors. It prefers to investments in companies engaged in electronic equipment and instruments, systems software, hardware, storage and peripherals and specialized consumer services, application software, healthcare technology, internet software and services, data processing and outsourced services, internet retail, human resources and employment services, biotechnology, healthcare equipment and education services. It invests in senior secured loans between $10 million and $75 million.

About Rand Capital

Rand Capital Corporation is a business development company specializing in subordinated debt with warrants or preferred equity and venture capital investments. Within private equity, the firm specializing in capital growth and lower middle market investments. Within venture capital, it specializing in early to late-stage private businesses. It does not prefer to invest in real estate sector. It prefers to invest in software, professional services, manufacturing, consumer, healthcare, automotive and public d stocks. It prefers to invest in East or Midwest U.S. operations sectors. It typically invests between $0.75 million and $5 million with initial target size of $1.5 million. It seeks to invest in companies having more than $2 million in revenue or having excess of $1.5 million and up to $5 million in EBITDA. It prefers to be a minority stake and seeks to take a Board seat in its portfolio companies. It typically holds its investments for a period up to five years.