Capitala Finance Corp. (NASDAQ: CPTA) and Harvest Capital Credit Corporation (NASDAQ:HCAP) are both small-cap finance companies, but which is the superior business? We will compare the two businesses based on the strength of their profitabiliy, dividends, institutional ownership, analyst recommendations, valuation, earnings and risk.

Dividends

Capitala Finance Corp. pays an annual dividend of $1.56 per share and has a dividend yield of 11.7%. Harvest Capital Credit Corporation pays an annual dividend of $1.35 per share and has a dividend yield of 9.6%. Capitala Finance Corp. pays out 135.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Harvest Capital Credit Corporation pays out 100.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Profitability

This table compares Capitala Finance Corp. and Harvest Capital Credit Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Capitala Finance Corp. 27.75% 11.06% 4.72%
Harvest Capital Credit Corporation 42.18% 11.15% 6.63%

Institutional & Insider Ownership

31.6% of Capitala Finance Corp. shares are owned by institutional investors. Comparatively, 7.5% of Harvest Capital Credit Corporation shares are owned by institutional investors. 8.4% of Capitala Finance Corp. shares are owned by company insiders. Comparatively, 9.5% of Harvest Capital Credit Corporation shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Valuation and Earnings

This table compares Capitala Finance Corp. and Harvest Capital Credit Corporation’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Capitala Finance Corp. N/A N/A N/A $1.15 11.58
Harvest Capital Credit Corporation N/A N/A N/A $1.35 10.36

Harvest Capital Credit Corporation is trading at a lower price-to-earnings ratio than Capitala Finance Corp., indicating that it is currently the more affordable of the two stocks.

Risk & Volatility

Capitala Finance Corp. has a beta of 1.02, meaning that its share price is 2% more volatile than the S&P 500. Comparatively, Harvest Capital Credit Corporation has a beta of 0.74, meaning that its share price is 26% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Capitala Finance Corp. and Harvest Capital Credit Corporation, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Capitala Finance Corp. 0 5 4 0 2.44
Harvest Capital Credit Corporation 0 2 0 0 2.00

Capitala Finance Corp. currently has a consensus target price of $15.44, suggesting a potential upside of 15.90%. Harvest Capital Credit Corporation has a consensus target price of $14.00, suggesting a potential upside of 0.07%. Given Capitala Finance Corp.’s stronger consensus rating and higher probable upside, analysts plainly believe Capitala Finance Corp. is more favorable than Harvest Capital Credit Corporation.

Summary

Harvest Capital Credit Corporation beats Capitala Finance Corp. on 7 of the 13 factors compared between the two stocks.

Capitala Finance Corp. Company Profile

Capitala Finance Corp. is an externally managed non-diversified, closed-end management investment company. The Company’s investment objective is to generate both current income and capital appreciation through debt and equity investments. Both directly and through its subsidiaries that are licensed by the United States Small Business Administration (SBA), the Company offers financing to business owners, management teams and financial sponsors for change of ownership transactions, recapitalizations, strategic acquisitions, business expansion and other growth initiatives. The Company provides capital to lower and traditional middle-market companies in the United States, with a non-exclusive emphasis on the Southeast, Southwest and Mid-Atlantic regions. The Company invests in first lien, second lien and subordinated loans. The Company’s investment advisor is Capitala Investment Advisors, LLC.

Harvest Capital Credit Corporation Company Profile

Harvest Capital Credit Corporation is an externally managed, closed-end, non-diversified management investment company. The Company operates as a business development company and provides customized financing solutions for small to mid-sized companies. Its investment objective is to generate both current income and capital appreciation by making direct investments in the form of subordinated debt, senior debt, and to a lesser extent, minority equity investments in privately-held the United States small to mid-sized companies. Its investment portfolio includes over 56.8% of senior secured term loans, 40.8% of junior secured term loans, 1.3% of equity investments and 1.1% of collateralized loan obligation (CLO) equity at fair value. It may also invest in other investments, such as loans to larger, publicly-traded companies, high-yield bonds and distressed debt securities. It may also invest in debt and equity securities issued by CLO funds. HCAP Advisors LLC is its investment adviser.

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