Fifth Street Asset Management (OTCMKTS: FSAM) and Pzena Investment Management (NYSE:PZN) are both small-cap finance companies, but which is the superior business? We will compare the two companies based on the strength of their risk, analyst recommendations, valuation, profitability, dividends, earnings and institutional ownership.

Volatility and Risk

Fifth Street Asset Management has a beta of 0.34, meaning that its stock price is 66% less volatile than the S&P 500. Comparatively, Pzena Investment Management has a beta of 1.75, meaning that its stock price is 75% more volatile than the S&P 500.

Insider & Institutional Ownership

8.6% of Fifth Street Asset Management shares are held by institutional investors. Comparatively, 17.7% of Pzena Investment Management shares are held by institutional investors. 85.4% of Fifth Street Asset Management shares are held by insiders. Comparatively, 55.9% of Pzena Investment Management shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Profitability

This table compares Fifth Street Asset Management and Pzena Investment Management’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Fifth Street Asset Management -20.92% -626.41% -2.71%
Pzena Investment Management 47.52% 37.90% 37.37%

Valuation & Earnings

This table compares Fifth Street Asset Management and Pzena Investment Management’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Fifth Street Asset Management $82.55 million 2.51 -$1.53 million ($0.14) -29.00
Pzena Investment Management $108.34 million 6.86 $16.17 million $0.70 15.50

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

Dividends

Fifth Street Asset Management pays an annual dividend of $0.25 per share and has a dividend yield of 6.2%. Pzena Investment Management pays an annual dividend of $0.12 per share and has a dividend yield of 1.1%. Fifth Street Asset Management pays out -178.6% of its earnings in the form of a dividend. Pzena Investment Management pays out 17.1% 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. Fifth Street Asset Management is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a summary of recent recommendations and price targets for Fifth Street Asset Management and Pzena Investment Management, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Fifth Street Asset Management 0 0 0 0 N/A
Pzena Investment Management 0 1 0 0 2.00

Summary

Pzena Investment Management beats Fifth Street Asset Management on 10 of the 13 factors compared between the two stocks.

Fifth Street Asset Management Company Profile

Fifth Street Asset Management Inc. is an alternative asset manager. The Company provides asset management services to its investment funds (the Fifth Street Funds or the funds), which consist of Fifth Street Finance Corp. (FSC) and Fifth Street Senior Floating Rate Corp. (FSFR), both publicly-traded business development companies (together, the BDCs). Its segment provides asset management services to the Fifth Street Funds. The Company conducts all of its operations through its subsidiaries, Fifth Street Management LLC (FSM), Fifth Street CLO Management LLC (CLO Management) and FSCO GP LLC (FSCO GP). The funds, managed by the Company, provide financing solutions to small and mid-sized companies across their capital structures, mainly in connection with investments by private equity sponsors. It provides credit solutions across the capital structure, including one-stop financing, unitranche debt, senior secured debt, mezzanine debt, equity co-investments and venture debt financing.

Pzena Investment Management Company Profile

Pzena Investment Management, Inc. is a holding company. The Company is the sole managing member of Pzena Investment Management, LLC. Pzena Investment Management, LLC is an investment management company. The Company also serves as the general partner of Pzena Investment Management, LP. The Company offers institutional investment products to public and corporate pension funds, endowments, foundations and certain commingled vehicles geared toward institutional investors. The Company also offers access to certain of its global and non-United States strategies through private placement vehicles and collective investment trusts. Pzena Investment Management, LLC is its operating company. Pzena Investment Management, LLC consists of Class A and Class B membership units.

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