Critical Survey: Fidus Investment Corporation (FDUS) versus KCAP Financial (KCAP)
Fidus Investment Corporation (NASDAQ: FDUS) and KCAP Financial (NASDAQ:KCAP) are both finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their risk, dividends, earnings, profitability, valuation, institutional ownership and analyst recommendations.
Earnings & Valuation
This table compares Fidus Investment Corporation and KCAP Financial’s revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Fidus Investment Corporation||N/A||N/A||N/A||$1.93||8.42|
|KCAP Financial||$32.54 million||3.89||$5.55 million||$0.15||22.80|
KCAP Financial has higher revenue and earnings than Fidus Investment Corporation. Fidus Investment Corporation is trading at a lower price-to-earnings ratio than KCAP Financial, indicating that it is currently the more affordable of the two stocks.
This is a breakdown of current ratings and recommmendations for Fidus Investment Corporation and KCAP Financial, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Fidus Investment Corporation||0||2||1||0||2.33|
Fidus Investment Corporation currently has a consensus price target of $17.33, suggesting a potential upside of 6.67%. KCAP Financial has a consensus price target of $9.75, suggesting a potential upside of 185.09%. Given KCAP Financial’s stronger consensus rating and higher possible upside, analysts clearly believe KCAP Financial is more favorable than Fidus Investment Corporation.
Institutional & Insider Ownership
30.7% of Fidus Investment Corporation shares are owned by institutional investors. Comparatively, 20.2% of KCAP Financial shares are owned by institutional investors. 1.3% of Fidus Investment Corporation shares are owned by insiders. Comparatively, 8.0% of KCAP Financial shares are owned by 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
Fidus Investment Corporation has a beta of 1.13, meaning that its stock price is 13% more volatile than the S&P 500. Comparatively, KCAP Financial has a beta of 1.71, meaning that its stock price is 71% more volatile than the S&P 500.
This table compares Fidus Investment Corporation and KCAP Financial’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Fidus Investment Corporation||62.46%||9.08%||5.56%|
Fidus Investment Corporation pays an annual dividend of $1.56 per share and has a dividend yield of 9.6%. KCAP Financial pays an annual dividend of $0.48 per share and has a dividend yield of 14.0%. Fidus Investment Corporation pays out 80.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. KCAP Financial pays out 320.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.
About Fidus Investment Corporation
Fidus Investment Corporation is a closed-end, non-diversified investment company. The Company provides customized debt and equity financing solutions to lower middle-market companies. The Company’s investment objective is to provide attractive risk-adjusted returns by generating both current income from its debt investments and capital appreciation from its equity-related investments. The Company typically invests in mezzanine debt, which includes senior subordinated notes and junior secured loans. The Company structures some of its debt investments as senior secured or unitranche loans. The Company’s equity securities typically consist of either a direct minority equity investment in common or preferred stock or membership/partnership interests of a portfolio company, or it may receive warrants to buy a minority equity interest in a portfolio company in connection with a debt investment. Its investment activities are managed by Fidus Investment Advisors, LLC, its investment advisor.
About KCAP Financial
KCAP Financial, Inc. is an internally managed, non-diversified closed-end investment company. The Company has approximately three principal areas of investments. First, the Company originates, structures and invests in senior secured term loans and mezzanine debt primarily in privately-held middle market companies (the debt securities portfolio). In addition, the Company may invest in the equity securities of privately held middle market companies. Second, the Company invests in asset management companies (the Asset Manager Affiliates) that manage collateralized loan obligation funds (CLO Funds). Third, the Company invests in debt and subordinated securities issued by CLOs (CLO fund securities). These CLO fund securities are primarily managed by its Asset Manager Affiliates, but from time-to-time the Company makes investments in CLO Fund Securities managed by other asset managers. The CLO funds typically invest in syndicated loans, high-yield bonds and other credit instruments.
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