Contrasting OFS Credit (NASDAQ:OCCI) & Monroe Capital (NASDAQ:MRCC)

OFS Credit (NASDAQ:OCCI) and Monroe Capital (NASDAQ:MRCC) are both small-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their valuation, analyst recommendations, risk, profitability, earnings, institutional ownership and dividends.

Analyst Recommendations

This is a summary of current ratings and price targets for OFS Credit and Monroe Capital, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
OFS Credit	0	0	0	0	0.00
Monroe Capital	0	2	0	0	2.00

Monroe Capital has a consensus price target of $8.00, indicating a potential upside of 22.98%. Given Monroe Capital’s stronger consensus rating and higher probable upside, analysts clearly believe Monroe Capital is more favorable than OFS Credit.

Institutional and Insider Ownership

23.8% of OFS Credit shares are owned by institutional investors. 1.0% of OFS Credit shares are owned by company insiders. Comparatively, 3.8% of Monroe Capital shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Volatility and Risk

OFS Credit has a beta of 0.62, indicating that its stock price is 38% less volatile than the S&P 500. Comparatively, Monroe Capital has a beta of 0.72, indicating that its stock price is 28% less volatile than the S&P 500.

Earnings & Valuation

This table compares OFS Credit and Monroe Capital”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
OFS Credit	$44.15 million	1.69	-$5.83 million	($0.37)	-12.84
Monroe Capital	$60.53 million	2.33	$9.70 million	($0.19)	-34.24

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

Profitability

This table compares OFS Credit and Monroe Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
OFS Credit	N/A	N/A	N/A
Monroe Capital	-9.58%	8.49%	3.58%

Dividends

OFS Credit pays an annual dividend of $1.50 per share and has a dividend yield of 31.6%. Monroe Capital pays an annual dividend of $1.00 per share and has a dividend yield of 15.4%. OFS Credit pays out -405.4% of its earnings in the form of a dividend. Monroe Capital pays out -526.3% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Summary

Monroe Capital beats OFS Credit on 11 of the 15 factors compared between the two stocks.

About OFS Credit

OFS Credit Company, Inc. is a fund of OFS Advisor.

About Monroe Capital

Monroe Capital Corporation is a business development company specializing in customized financing solutions in senior, unitranche and junior secured debt, subordinated debt financing and to a lesser extent, unsecured debt and equity, including equity co-investments in preferred and common stock and warrants. It also provides financing primarily to leveraged buyouts in lower middle-market companies. It focuses to invest in the United States and Canada. The fund prefers to invest in companies with EBITDA between $3 and $35 million. Its makes minority equity investments.