Critical Analysis: Fidus Investment (NASDAQ:FDUS) vs. Main Street Capital (NYSE:MAIN)

Main Street Capital (NYSE:MAIN) and Fidus Investment (NASDAQ:FDUS) are both finance companies, but which is the superior business? We will compare the two businesses based on the strength of their institutional ownership, earnings, dividends, profitability, valuation, risk and analyst recommendations.

Analyst Ratings

This is a summary of recent ratings and price targets for Main Street Capital and Fidus Investment, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Main Street Capital	0	5	2	0	2.29
Fidus Investment	0	2	1	1	2.75

Main Street Capital currently has a consensus target price of $59.60, indicating a potential upside of 4.26%. Fidus Investment has a consensus target price of $21.75, indicating a potential upside of 10.57%. Given Fidus Investment’s stronger consensus rating and higher probable upside, analysts clearly believe Fidus Investment is more favorable than Main Street Capital.

Insider & Institutional Ownership

20.3% of Main Street Capital shares are held by institutional investors. Comparatively, 28.1% of Fidus Investment shares are held by institutional investors. 4.0% of Main Street Capital shares are held by company insiders. Comparatively, 0.9% of Fidus Investment shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Volatility & Risk

Main Street Capital has a beta of 0.84, suggesting that its stock price is 16% less volatile than the S&P 500. Comparatively, Fidus Investment has a beta of 0.91, suggesting that its stock price is 9% less volatile than the S&P 500.

Earnings and Valuation

This table compares Main Street Capital and Fidus Investment”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Main Street Capital	$622.90 million	8.22	$508.08 million	$6.03	9.48
Fidus Investment	$96.81 million	7.40	$78.29 million	$2.36	8.33

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

Profitability

This table compares Main Street Capital and Fidus Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Main Street Capital	96.16%	12.70%	6.85%
Fidus Investment	51.88%	11.52%	6.41%

Dividends

Main Street Capital pays an annual dividend of $3.06 per share and has a dividend yield of 5.4%. Fidus Investment pays an annual dividend of $1.72 per share and has a dividend yield of 8.7%. Main Street Capital pays out 50.7% of its earnings in the form of a dividend. Fidus Investment pays out 72.9% 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. Main Street Capital has increased its dividend for 4 consecutive years.

Summary

Main Street Capital beats Fidus Investment on 12 of the 18 factors compared between the two stocks.

About Main Street Capital

Main Street Capital Corporation is a business development company specializes in equity capital to lower middle market companies. The firm specializing in recapitalizations, management buyouts, refinancing, family estate planning, management buyouts, refinancing, industry consolidation, mature, later stage emerging growth. The firm also provides debt capital to middle market companies for acquisitions, management buyouts, growth financings, recapitalizations, and refinancing. The firm seeks to partner with entrepreneurs, business owners and management teams and generally provides “one stop” financing alternatives within its lower middle market portfolio. It prefers to invest in air freight and logistics, auto components, building products, chemicals, commercial services, computers, construction and engineering, consumer finance, consumer services, electronic equipment, energy equipment and services, financial services, health care equipment, health care providers, hotels, restaurants, and leisure, internet software and services, IT Services, machinery, oil, gas and consumable fuels, paper and forest products, professional and industrial services, road and rail, software, specialty retail, telecommunication, consumer discretionary, energy, materials, technology, and transportation. The firm typically invests in lower middle market companies generally with annual revenues between $10 million and $150 million. It prefers to invest in ranging between $5 million and $100 million in equity investment and enterprise value in ranging between $3 million and $20 million. The firm typically prefers to invest in the range of $5 million and $150 million per transaction in debt investment value and in the range of $3 million and $75 million in annual EBITDA in between $3 million and $25 million in lower middle market $5 million and $75 million in credit solution. The firm’s middle market debt investments are made in businesses that are generally larger in size than its lower middle market portfolio companies. It takes 5 percent minority and up to 50 percent majority equity investments. Main Street Capital Corporation was founded in 2007 and is based in Houston, Texas with an additional office in Chojnów, Poland.

About Fidus Investment

Fidus Investment Corporation is a business development company. It specializing in leveraged buyouts, refinancings, change of ownership transactions, recapitalizations, strategic acquisitions, mezzanine, growth capital, business expansion, lower middle market investments, debt investments, subordinated and second lien loans, senior secured and unitranche debt, preferred equity, warrants, subordinated debt, senior subordinated notes, junior secured loans, and unitranche loans. It does not invest in turnarounds or distressed situations. The fund prefers to invest in aerospace and defense, business services, consumer products and services including retail, food, and beverage, healthcare products and services, industrial products and services, information technology services, niche manufacturing, transportation and logistics, and value-added distribution sectors. It seeks to invest in companies based in United States. The fund typically invests between $5 million and $15 million per transaction in companies with annual revenues between $10 million and $150 million and an annual EBITDA between $3 million and $20 million, but it can occasionally invest in larger or smaller companies. It seeks to acquire minority equity stakes and board observation rights in conjunction with its investments.