WhiteHorse Finance (NASDAQ: WHF) and American Capital Senior Floating (NASDAQ:ACSF) are both small-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their analyst recommendations, valuation, risk, institutional ownership, dividends, profitability and earnings.

Volatility and Risk

WhiteHorse Finance has a beta of 0.75, indicating that its share price is 25% less volatile than the S&P 500. Comparatively, American Capital Senior Floating has a beta of 1.3, indicating that its share price is 30% more volatile than the S&P 500.

Earnings and Valuation

This table compares WhiteHorse Finance and American Capital Senior Floating’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
WhiteHorse Finance $53.85 million 5.30 $31.32 million $1.86 7.47
American Capital Senior Floating $17.57 million 6.20 $30.50 million $3.11 3.50

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

Insider and Institutional Ownership

9.5% of WhiteHorse Finance shares are owned by institutional investors. Comparatively, 30.9% of American Capital Senior Floating shares are owned by institutional investors. 1.4% of WhiteHorse Finance shares are owned by insiders. Comparatively, 0.2% of American Capital Senior Floating shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Dividends

WhiteHorse Finance pays an annual dividend of $1.42 per share and has a dividend yield of 10.2%. American Capital Senior Floating pays an annual dividend of $1.07 per share and has a dividend yield of 9.8%. WhiteHorse Finance pays out 76.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. American Capital Senior Floating pays out 34.4% of its earnings in the form of a dividend.

Analyst Ratings

This is a breakdown of current ratings and price targets for WhiteHorse Finance and American Capital Senior Floating, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
WhiteHorse Finance 0 1 0 0 2.00
American Capital Senior Floating 0 0 0 0 N/A

WhiteHorse Finance presently has a consensus target price of $15.00, indicating a potential upside of 7.99%. Given WhiteHorse Finance’s higher probable upside, equities analysts plainly believe WhiteHorse Finance is more favorable than American Capital Senior Floating.

Profitability

This table compares WhiteHorse Finance and American Capital Senior Floating’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
WhiteHorse Finance 64.58% 9.69% 5.54%
American Capital Senior Floating 62.20% 4.68% 2.49%

Summary

WhiteHorse Finance beats American Capital Senior Floating on 9 of the 14 factors compared between the two stocks.

About WhiteHorse Finance

WhiteHorse Finance, Inc. is a non-diversified, closed-end management investment company. The Company is a direct lender targeting debt investments in privately held, small-cap companies located in the United States. The Company’s investment objective is to generate attractive risk-adjusted returns primarily by originating and investing in senior secured loans, including first lien and second lien facilities, to performing small-cap companies across a range of industries that typically carry a floating interest rate based on the London Interbank Offered Rate (LIBOR) and have a term of 3 to 6 years. The Company may also make investments at other levels of a company’s capital structure, including mezzanine loans or equity interests. The Company also may receive warrants to purchase common stock in connection with its debt investments. Its investment advisor is H.I.G. WhiteHorse Advisers, LLC.

About American Capital Senior Floating

American Capital Senior Floating, Ltd. is a non-diversified closed-end investment management company. The Company’s investment objective is to provide attractive, risk-adjusted returns over the long term primarily through current income while seeking to preserve its capital. It manages a leveraged portfolio composed primarily of diversified investments in first lien and second lien floating rate loans principally to the United States-based companies (collectively, Senior Floating Rate Loans or SFRLs), which are referred to as leveraged loans. It invests in equity tranches of collateralized loan obligations (CLOs), which are securitized vehicles collateralized primarily by SFRLs, and it may invest in debt tranches of CLOs. In addition, it may selectively invest in loans issued by middle market companies, mezzanine and unitranche loans and high yield bonds. It has over 80% of its assets in Senior Floating Rate Loans. The Company is managed by American Capital ACSF Management, LLC.

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