Critical Contrast: PennantPark Floating Rate Capital (PFLT) and Prospect Capital Corporation (PSEC)
PennantPark Floating Rate Capital (NASDAQ: PFLT) and Prospect Capital Corporation (NASDAQ:PSEC) are both finance companies, but which is the better business? We will compare the two companies based on the strength of their valuation, institutional ownership, analyst recommendations, dividends, earnings, profitability and risk.
Volatility and Risk
PennantPark Floating Rate Capital has a beta of 0.6, indicating that its share price is 40% less volatile than the S&P 500. Comparatively, Prospect Capital Corporation has a beta of 0.51, indicating that its share price is 49% less volatile than the S&P 500.
This is a summary of current ratings and target prices for PennantPark Floating Rate Capital and Prospect Capital Corporation, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|PennantPark Floating Rate Capital||0||1||4||0||2.80|
|Prospect Capital Corporation||1||3||0||0||1.75|
PennantPark Floating Rate Capital currently has a consensus price target of $14.90, indicating a potential upside of 5.52%. Prospect Capital Corporation has a consensus price target of $6.17, indicating a potential downside of 9.98%. Given PennantPark Floating Rate Capital’s stronger consensus rating and higher probable upside, analysts clearly believe PennantPark Floating Rate Capital is more favorable than Prospect Capital Corporation.
PennantPark Floating Rate Capital pays an annual dividend of $1.14 per share and has a dividend yield of 8.1%. Prospect Capital Corporation pays an annual dividend of $0.72 per share and has a dividend yield of 10.5%. PennantPark Floating Rate Capital pays out 78.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Prospect Capital Corporation pays out 144.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.
Insider & Institutional Ownership
30.8% of PennantPark Floating Rate Capital shares are held by institutional investors. Comparatively, 15.2% of Prospect Capital Corporation shares are held by institutional investors. 1.2% of PennantPark Floating Rate Capital shares are held by company insiders. Comparatively, 7.1% of Prospect Capital Corporation shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.
Earnings & Valuation
This table compares PennantPark Floating Rate Capital and Prospect Capital Corporation’s top-line revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||NetIncome||Earnings Per Share||Price/Earnings Ratio|
|PennantPark Floating Rate Capital||$46.30 million||9.91||$33.49 million||$1.46||9.67|
|Prospect Capital Corporation||$701.05 million||3.52||$252.90 million||$0.50||13.70|
Prospect Capital Corporation has higher revenue and earnings than PennantPark Floating Rate Capital. PennantPark Floating Rate Capital is trading at a lower price-to-earnings ratio than Prospect Capital Corporation, indicating that it is currently the more affordable of the two stocks.
This table compares PennantPark Floating Rate Capital and Prospect Capital Corporation’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|PennantPark Floating Rate Capital||73.28%||7.26%||4.15%|
|Prospect Capital Corporation||27.00%||8.63%||4.75%|
PennantPark Floating Rate Capital beats Prospect Capital Corporation on 10 of the 16 factors compared between the two stocks.
About PennantPark Floating Rate Capital
PennantPark Floating Rate Capital Ltd. is a business development company. The Company is a closed-end, externally managed and non-diversified investment company. Its investment objectives are to generate current income and capital appreciation by investing primarily in floating rate loans and other investments made to the United States middle-market companies. It provides first lien secured debt and other opportunistic financings (senior notes, second lien, mezzanine, private high yield debt, and preferred and common stock) to middle market sponsors and companies. Its investments may include equity features, such as direct investments in the equity securities of borrowers or warrants or options to buy a minority interest in a portfolio company. It has investments in various sectors, including aerospace and defense; consumer services; healthcare and pharmaceuticals, and others. Its investment activities are managed by the investment advisor, PennantPark Investment Advisers, LLC.
About Prospect Capital Corporation
Prospect Capital Corporation is a financial services company. The Company primarily lends to and invests in middle market privately held companies. The Company is a closed-end investment company. Its investment objective is to generate both current income and long-term capital appreciation through debt and equity investments. The Company invests primarily in senior and subordinated debt and equity of private companies in need of capital for acquisitions, divestitures, growth, development, recapitalizations and other purposes. The Company makes investments, including lending in private equity sponsored transactions, lending directly to companies not owned by private equity firms, control investments in corporate operating companies, control investments in financial companies, investments in structured credit, real estate investments, investments in syndicated debt, aircraft leasing and online lending. The Company is managed by its investment advisor, Prospect Capital Management L.P.
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