FS Investment (NYSE: FSIC) and Horizon Technology Finance (NASDAQ:HRZN) are both small-cap finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their analyst recommendations, risk, earnings, profitability, valuation, dividends and institutional ownership.

Profitability

This table compares FS Investment and Horizon Technology Finance’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
FS Investment 52.49% 8.97% 4.96%
Horizon Technology Finance 24.46% 9.96% 6.31%

Valuation & Earnings

This table compares FS Investment and Horizon Technology Finance’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
FS Investment $422.81 million 4.68 $294.29 million $0.90 8.94
Horizon Technology Finance $32.98 million 3.73 -$4.91 million $0.57 18.75

FS Investment has higher revenue and earnings than Horizon Technology Finance. FS Investment is trading at a lower price-to-earnings ratio than Horizon Technology Finance, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

FS Investment has a beta of 0.95, suggesting that its stock price is 5% less volatile than the S&P 500. Comparatively, Horizon Technology Finance has a beta of 0.84, suggesting that its stock price is 16% less volatile than the S&P 500.

Dividends

FS Investment pays an annual dividend of $0.89 per share and has a dividend yield of 11.1%. Horizon Technology Finance pays an annual dividend of $1.20 per share and has a dividend yield of 11.2%. FS Investment pays out 98.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Horizon Technology Finance pays out 210.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Analyst Ratings

This is a summary of current ratings and target prices for FS Investment and Horizon Technology Finance, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
FS Investment 0 4 0 0 2.00
Horizon Technology Finance 1 3 1 0 2.00

FS Investment presently has a consensus price target of $9.67, indicating a potential upside of 20.08%. Horizon Technology Finance has a consensus price target of $10.75, indicating a potential upside of 0.56%. Given FS Investment’s higher probable upside, equities analysts plainly believe FS Investment is more favorable than Horizon Technology Finance.

Insider & Institutional Ownership

32.5% of FS Investment shares are owned by institutional investors. Comparatively, 17.3% of Horizon Technology Finance shares are owned by institutional investors. 1.0% of FS Investment shares are owned by insiders. Comparatively, 1.3% of Horizon Technology Finance shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Summary

FS Investment beats Horizon Technology Finance on 10 of the 15 factors compared between the two stocks.

FS Investment Company Profile

FS Investment Corporation is an externally managed, non-diversified, closed-end management investment company. The Company’s investment objectives are to generate current income and long-term capital appreciation. Its portfolio consists primarily of investments in senior secured loans and second lien secured loans of the private United States middle market companies and subordinated loans of the private United States companies. It may purchase interests in loans or make other debt investments, including investments in senior secured bonds, through secondary market transactions in the over-the-counter market or directly from target companies as primary market or directly originated investments. It invests in a range of industries, including capital goods; consumer services; consumer durables and apparel; materials; commercial and professional services, and diversified financials. Its investment advisor is FB Income Advisor, LLC.

Horizon Technology Finance Company Profile

Horizon Technology Finance Corporation is an externally managed, closed-end, non-diversified management investment company. The Company’s investment objective is to maximize investment portfolio’s total return by generating current income from the debt investments it makes and capital appreciation from the warrants it receives when making such debt investments. It lends to and invests in development-stage companies in the technology, life science, healthcare information and services and cleantech industries (collectively Target Industries). It is focused on making secured debt investments (Venture Loans) to venture capital backed companies in its Target Industries. As of December 31, 2016, its debt investment portfolio consisted of 44 debt investments. As of December 31, 2016, the Company held warrants to purchase stock, predominantly preferred stock, in 78 portfolio companies, equity positions in five portfolio companies and success fee arrangements in 11 portfolio companies.

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