Financial Contrast: Pennantpark Floating Rate Capital (PFLT) & TPG Specialty Lending (TSLX)
TPG Specialty Lending (NYSE: TSLX) and Pennantpark Floating Rate Capital (NASDAQ:PFLT) are both small-cap financials companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, dividends, profitability, earnings, analyst recommendations, risk and institutional ownership.
Volatility & Risk
TPG Specialty Lending has a beta of 0.63, suggesting that its share price is 37% less volatile than the S&P 500. Comparatively, Pennantpark Floating Rate Capital has a beta of 0.61, suggesting that its share price is 39% less volatile than the S&P 500.
This table compares TPG Specialty Lending and Pennantpark Floating Rate Capital’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|TPG Specialty Lending||54.78%||11.08%||6.50%|
|Pennantpark Floating Rate Capital||47.64%||7.49%||4.48%|
This is a summary of recent ratings and recommmendations for TPG Specialty Lending and Pennantpark Floating Rate Capital, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|TPG Specialty Lending||0||0||4||0||3.00|
|Pennantpark Floating Rate Capital||0||0||4||0||3.00|
TPG Specialty Lending currently has a consensus price target of $21.17, suggesting a potential upside of 17.40%. Pennantpark Floating Rate Capital has a consensus price target of $14.69, suggesting a potential upside of 17.97%. Given Pennantpark Floating Rate Capital’s higher probable upside, analysts clearly believe Pennantpark Floating Rate Capital is more favorable than TPG Specialty Lending.
Valuation and Earnings
This table compares TPG Specialty Lending and Pennantpark Floating Rate Capital’s top-line revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|TPG Specialty Lending||$210.90 million||5.16||$120.25 million||$1.86||9.69|
|Pennantpark Floating Rate Capital||$59.50 million||8.11||$36.32 million||$0.92||13.53|
TPG Specialty Lending has higher revenue and earnings than Pennantpark Floating Rate Capital. TPG Specialty Lending is trading at a lower price-to-earnings ratio than Pennantpark Floating Rate Capital, indicating that it is currently the more affordable of the two stocks.
Insider & Institutional Ownership
62.9% of TPG Specialty Lending shares are held by institutional investors. Comparatively, 29.7% of Pennantpark Floating Rate Capital shares are held by institutional investors. 4.9% of TPG Specialty Lending shares are held by company insiders. Comparatively, 1.0% of Pennantpark Floating Rate Capital shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.
TPG Specialty Lending pays an annual dividend of $1.56 per share and has a dividend yield of 8.7%. Pennantpark Floating Rate Capital pays an annual dividend of $1.14 per share and has a dividend yield of 9.2%. TPG Specialty Lending pays out 83.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Pennantpark Floating Rate Capital pays out 123.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.
TPG Specialty Lending beats Pennantpark Floating Rate Capital on 10 of the 14 factors compared between the two stocks.
TPG Specialty Lending Company Profile
TPG Specialty Lending, Inc. is an externally managed, closed-end, non-diversified management investment company. The Company is a specialty finance company focused on lending to middle-market companies. It seeks to generate current income primarily in the United States-domiciled middle-market companies through direct originations of senior secured loans and originations of mezzanine and unsecured loans and investments in corporate bonds and equity securities. The Company invests in first-lien debt, second-lien debt, mezzanine and unsecured debt and equity and other investments. Its first-lien debt may include standalone first-lien loans; last out first-lien loans; unitranche loans and secured corporate bonds. Its second-lien debt may include secured loans and secured corporate bonds, with a secondary priority behind first-lien debt. As of December 31, 2016, the Company’s portfolio was invested across 19 different industries. The Company’s investment advisor is TSL Advisers, LLC.
Pennantpark Floating Rate Capital Company Profile
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.
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