Contrasting Capital Southwest (NASDAQ:CSWC) and Apollo Global Management (NYSE:APO)

Apollo Global Management (NYSE:APO) and Capital Southwest (NASDAQ:CSWC) are both finance companies, but which is the better stock? We will compare the two businesses based on the strength of their earnings, valuation, profitability, analyst recommendations, institutional ownership, risk and dividends.

Risk and Volatility

Apollo Global Management has a beta of 1.57, meaning that its stock price is 57% more volatile than the S&P 500. Comparatively, Capital Southwest has a beta of 0.76, meaning that its stock price is 24% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent recommendations for Apollo Global Management and Capital Southwest, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Apollo Global Management	0	2	12	1	2.93
Capital Southwest	0	3	7	0	2.70

Apollo Global Management presently has a consensus price target of $165.62, indicating a potential upside of 24.30%. Capital Southwest has a consensus price target of $23.64, indicating a potential upside of 1.95%. Given Apollo Global Management’s stronger consensus rating and higher possible upside, equities research analysts plainly believe Apollo Global Management is more favorable than Capital Southwest.

Dividends

Apollo Global Management pays an annual dividend of $2.04 per share and has a dividend yield of 1.5%. Capital Southwest pays an annual dividend of $2.32 per share and has a dividend yield of 10.0%. Apollo Global Management pays out 29.8% of its earnings in the form of a dividend. Capital Southwest pays out 128.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Apollo Global Management has raised its dividend for 3 consecutive years and Capital Southwest has raised its dividend for 2 consecutive years.

Earnings & Valuation

This table compares Apollo Global Management and Capital Southwest”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Apollo Global Management	$27.47 billion	2.82	$4.58 billion	$6.84	19.48
Capital Southwest	$149.51 million	9.33	$70.55 million	$1.81	12.81

Apollo Global Management has higher revenue and earnings than Capital Southwest. Capital Southwest is trading at a lower price-to-earnings ratio than Apollo Global Management, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

77.1% of Apollo Global Management shares are owned by institutional investors. Comparatively, 23.4% of Capital Southwest shares are owned by institutional investors. 8.2% of Apollo Global Management shares are owned by company insiders. Comparatively, 2.8% of Capital Southwest shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Profitability

This table compares Apollo Global Management and Capital Southwest’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Apollo Global Management	15.63%	15.43%	1.23%
Capital Southwest	45.46%	13.76%	6.51%

Summary

Apollo Global Management beats Capital Southwest on 14 of the 18 factors compared between the two stocks.

About Apollo Global Management

Apollo Global Management, Inc. is a private equity firm specializing in investments in credit, private equity, infrastructure, secondaries and real estate markets. The firm prefers to invest in private and public markets. The firm’s private equity investments include traditional buyouts, recapitalization, distressed buyouts and debt investments in real estate, corporate partner buyouts, distressed asset, corporate carve-outs, middle market, growth, venture capital, turnaround, bridge, corporate restructuring, special situation, acquisition, and industry consolidation transactions. For credit strategies, the firm focuses to invest in multi-sector credit, semi-liquid credit, direct lending, first lien, unitranche, whole loans and private credit. The firm provides its services to endowment and sovereign wealth funds, as well as other institutional and individual investors. It manages client focused portfolios. The firm launches and manages hedge funds for its clients. It also manages real estate funds and private equity funds for its clients. The firm invests in the fixed income and alternative investment markets across the globe. Its fixed income investments include income-oriented senior loans, bonds, collateralized loan obligations, structured credit, opportunistic credit, non-performing loans, distressed debt, mezzanine debt, and value oriented fixed income securities. The firm seeks to invest in chemicals, commodities, consumer and retail, oil and gas, metals, mining, agriculture, commodities, distribution and transportation, financial and business services, manufacturing and industrial, media distribution, cable, entertainment and leisure, telecom, technology, natural resources, energy, packaging and materials, and satellite and wireless industries. It also focuses on clean energy, sustainable industry, climate solutions, energy transition, industrial decarbonization, sustainable mobility, sustainable resource use, and sustainable real estate. It seeks to invest in companies based in across Africa, Asia, North America with a focus on United States, Western Europe and Europe. It employs a combination of contrarian, value, and distressed strategies to make its investments. The firm seeks to make investments in the range of $75 million and $1500 million. The firm seeks to invest in companies with Enterprise value between $750 million to $2500 million. The firm conducts in-house research to create its investment portfolio. It seeks to acquire minority and majority positions in its portfolio companies. Apollo Global Management, Inc. was founded in 1990 and is headquartered in New York, New York with additional offices in North America, Asia, Africa and Europe.

About Capital Southwest

Capital Southwest Corporation is a business development company specializing in credit and private equity and venture capital investments in middle market companies, mezzanine, later stage, mature, late venture, emerging growth, buyouts, industry consolidation, recapitalizations and growth capital investments. It does not invest in startups, publicly traded companies, real estate developments, project finance opportunities, oil and gas exploration businesses, troubled companies, turnarounds, and companies in which significant senior management is departing. In lower middle market, the firm typically invests in growth financing, bolt-on acquisitions, new platform acquisitions, refinancing, dividend recapitalizations, sponsor-led buyouts, and management buyouts situations. The investment structures are Unitranche debt, subordinated debt, senior debt, first and second lien debt, and preferred and common equity. The firm makes equity co-investments alongside debt investments, up to 20% of total check and only makes non-control investments. The firm is Industry agnostic, but it prefers to invest in Industrial manufacturing and services, value-added distribution, healthcare products and services, business services, specialty chemicals, food and beverage, tech-enabled services and SaaS models. The firm seeks to invest in energy services and products, industrial technologies, and specialty chemicals and products. Within energy services and products, the firm seeks to invest in each segment of the industry, including upstream, midstream and downstream, excluding exploration and production with a focus on differentiated products and services, equipment and tool rental, consumable products, and drilling and completion chemicals. Within industrial technologies, it seeks to invest in automation and process controls, handling and packaging equipment, industrial filtration and fluid handling, measurement, monitoring and testing, professional tools, and sensors and instrumentation. Within and specialty chemicals and products, the firm seeks to invest in businesses that develop and manufacture highly differentiated chemicals and products including adhesives, coatings and sealants, catalysts and absorbents, cosmeceuticals, fine chemicals, flavors and fragrances, performance lubricants, polymers, plastics and composites, chemical dispensing and filtration equipment, professional and industrial trade consumables and tools, engineered solutions for HVAC, plumbing, and electrical installations, specified high performance materials for fire protection and oilfield applications. It may also invest in exceptional opportunities in building products. The firm seeks to invest in the United States and North America. The firm seeks to make investments ranging from $5 million and $25 million in securities. It leads $5 to $70 million financings, Its Target holds of $5 million and $45 million, and the firm is willing to backstop up to $55mm with an active network of co-investors. It seeks to invest in the firm with minimum EBITDA is $3 million and $25 million. In addition to making direct investments, the firm allocates capital to syndicated first and second lien term loans in the upper middle market. Criteria for Upper Middle Market Syndicated 1st Lien is EBITDA Size more than $30 million, Closing Leverage greater than 4 times, investment hold size between $5 million and $7 million up to $15mm with senior loan fund, investment yield greater than 6.5%. Criteria for Upper Middle Market Syndicated 2nd Lien is EBITDA Size more than $50 million, Closing Leverage greater than 6 times, investment hold size between $5 million and $7 million, investment yield greater than 9%. It prefers to take a majority and minority stake. The firm has the flexibility to hold investments for very long period in its portfolio companies. It may also invest through warrants. The firm prefers to take Board participation in its portfolio companies. Capital Southwest Corporation was founded on April 19, 1961 and is based in Dallas, Texas.