Great Elm Capital (NASDAQ: GECC) and Piper Jaffray Companies (NYSE:PJC) are both small-cap finance companies, but which is the better business? We will contrast the two companies based on the strength of their profitability, institutional ownership, valuation, dividends, risk, analyst recommendations and earnings.

Profitability

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This table compares Great Elm Capital and Piper Jaffray Companies’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Great Elm Capital -9.26% 11.93% 7.83%
Piper Jaffray Companies -7.30% 11.58% 4.72%

Institutional & Insider Ownership

8.1% of Great Elm Capital shares are held by institutional investors. Comparatively, 70.1% of Piper Jaffray Companies shares are held by institutional investors. 5.4% of Piper Jaffray Companies shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Great Elm Capital and Piper Jaffray Companies, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Great Elm Capital 0 2 2 0 2.50
Piper Jaffray Companies 1 4 1 0 2.00

Great Elm Capital presently has a consensus target price of $13.33, suggesting a potential upside of 35.92%. Piper Jaffray Companies has a consensus target price of $30.93, suggesting a potential downside of 63.89%. Given Great Elm Capital’s stronger consensus rating and higher possible upside, analysts clearly believe Great Elm Capital is more favorable than Piper Jaffray Companies.

Dividends

Great Elm Capital pays an annual dividend of $1.00 per share and has a dividend yield of 10.2%. Piper Jaffray Companies pays an annual dividend of $1.50 per share and has a dividend yield of 1.8%. Great Elm Capital pays out -434.8% of its earnings in the form of a dividend. Piper Jaffray Companies pays out -28.1% 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. Great Elm Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation & Earnings

This table compares Great Elm Capital and Piper Jaffray Companies’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Great Elm Capital $29.73 million 3.51 -$2.75 million ($0.23) -42.65
Piper Jaffray Companies $895.19 million 1.45 -$61.93 million ($5.34) -16.04

Great Elm Capital has higher earnings, but lower revenue than Piper Jaffray Companies. Great Elm Capital is trading at a lower price-to-earnings ratio than Piper Jaffray Companies, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Great Elm Capital has a beta of 0.47, indicating that its stock price is 53% less volatile than the S&P 500. Comparatively, Piper Jaffray Companies has a beta of 1.48, indicating that its stock price is 48% more volatile than the S&P 500.

Summary

Great Elm Capital beats Piper Jaffray Companies on 10 of the 16 factors compared between the two stocks.

Great Elm Capital Company Profile

Great Elm Capital Corp. is a closed-end, non-diversified management investment company. The Company is focused on generating interest and capital appreciation by investing in the capital structures of middle-market companies that operate in a range of industries. The Company also focuses on making multi-year investments, primarily in secured and senior unsecured debt instruments that it purchases in the secondary markets, though it may also originate investments or acquire them directly from issuers. The Company’s investment advisor is Great Elm Capital Management, Inc. (GECM). Great Elm Capital Group is the parent company of GECM.

Piper Jaffray Companies Company Profile

Piper Jaffray Companies is an investment bank and asset management company. The Company’s segments include Capital Markets and Asset Management. The Capital Markets segment provides investment banking and institutional sales, trading and research services for various equity and fixed income products. The Asset Management segment includes its traditional asset management business and its investments in registered funds and private funds or partnerships that it manages. It provides a range of products and services, including equity and debt capital markets products; public finance services; financial advisory services; equity and fixed income institutional brokerage; equity and fixed income research, and asset management services. The Company serves the needs of corporations, private equity groups, public entities, non-profit entities and institutional investors in the United States and internationally.

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