Eagle Point Credit (NYSE: ECC) and FS Investment (NYSE:FSIC) are both small-cap finance companies, but which is the better stock? We will compare the two companies based on the strength of their dividends, institutional ownership, risk, profitability, valuation, analyst recommendations and earnings.

Analyst Ratings

This is a breakdown of current recommendations for Eagle Point Credit and FS Investment, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Eagle Point Credit 0 0 4 0 3.00
FS Investment 0 3 1 0 2.25

Eagle Point Credit currently has a consensus target price of $21.13, indicating a potential upside of 12.31%. FS Investment has a consensus target price of $9.67, indicating a potential upside of 31.52%. Given FS Investment’s higher possible upside, analysts clearly believe FS Investment is more favorable than Eagle Point Credit.

Earnings & Valuation

This table compares Eagle Point Credit and FS Investment’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Eagle Point Credit $55.84 million 6.22 $90.58 million $2.52 7.46
FS Investment $422.81 million 4.27 $294.29 million $0.90 8.17

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

Profitability

This table compares Eagle Point Credit and FS Investment’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Eagle Point Credit 65.86% 10.73% 7.07%
FS Investment 52.49% 8.97% 4.96%

Dividends

Eagle Point Credit pays an annual dividend of $2.40 per share and has a dividend yield of 12.8%. FS Investment pays an annual dividend of $0.76 per share and has a dividend yield of 10.3%. Eagle Point Credit pays out 95.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. FS Investment pays out 84.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Institutional and Insider Ownership

56.9% of Eagle Point Credit shares are held by institutional investors. Comparatively, 32.4% of FS Investment shares are held by institutional investors. 0.6% of Eagle Point Credit shares are held by insiders. Comparatively, 1.0% of FS Investment shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Risk & Volatility

Eagle Point Credit has a beta of 0.27, meaning that its share price is 73% less volatile than the S&P 500. Comparatively, FS Investment has a beta of 0.95, meaning that its share price is 5% less volatile than the S&P 500.

Summary

Eagle Point Credit beats FS Investment on 10 of the 16 factors compared between the two stocks.

About Eagle Point Credit

Eagle Point Credit Company Inc. is a non-diversified, closed-end management investment company. The Company’s primary investment objective is to generate high current income, with a secondary objective to generate capital appreciation. The Company primarily invests in equity and junior debt tranches of collateralized loan obligations (CLOs) that are collateralized by a portfolio consisting primarily of the below investment grade United States senior secured loans. It may also invest in other securities and instruments related to these investments. The Company’s portfolio includes its investments in various industries, such as business equipment and services; healthcare; electronics/electrical; leisure goods/activities/movies; retailers (except food and drug); chemicals and plastics; telecommunications; financial intermediaries, and utilities. The Company’s advisor is Eagle Point Credit Management LLC.

About FS Investment

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.

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