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

Institutional and Insider Ownership

8.3% of Fifth Street Asset Management shares are owned by institutional investors. Comparatively, 60.8% of Medley Management shares are owned by institutional investors. 85.4% of Fifth Street Asset Management shares are owned by insiders. Comparatively, 5.1% of Medley Management shares are owned by 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.

Valuation and Earnings

This table compares Fifth Street Asset Management and Medley Management’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Fifth Street Asset Management $82.55 million 2.45 -$1.53 million ($0.14) -28.93
Medley Management $76.03 million 0.47 $990,000.00 $0.24 27.29

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

Risk and Volatility

Fifth Street Asset Management has a beta of 0.35, suggesting that its stock price is 65% less volatile than the S&P 500. Comparatively, Medley Management has a beta of 1.32, suggesting that its stock price is 32% more volatile than the S&P 500.

Dividends

Fifth Street Asset Management pays an annual dividend of $0.25 per share and has a dividend yield of 6.2%. Medley Management pays an annual dividend of $0.80 per share and has a dividend yield of 12.2%. Fifth Street Asset Management pays out -178.6% of its earnings in the form of a dividend. Medley Management pays out 333.3% 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 Fifth Street Asset Management and Medley 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%
Medley Management 27.32% N/A 13.04%

Analyst Recommendations

This is a summary of current ratings and recommmendations for Fifth Street Asset Management and Medley Management, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Fifth Street Asset Management 0 0 0 0 N/A
Medley Management 0 3 0 0 2.00

Medley Management has a consensus target price of $9.25, suggesting a potential upside of 41.22%. Given Medley Management’s higher possible upside, analysts clearly believe Medley Management is more favorable than Fifth Street Asset Management.

Summary

Medley Management beats Fifth Street Asset Management on 10 of the 14 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.

Medley Management Company Profile

Medley Management Inc. is an asset management firm offering yield solutions to retail and institutional investors. The Company operates in the investment management segment. It is focused on credit-related investment strategies, primarily originating senior secured loans to private middle market companies in the United States. The Company generally holds these loans to maturity. Its national direct origination franchise provides capital to the middle market in the United States. The Company has over $4.8 billion of assets under management (AUM) in approximately two business development companies (BDCs), Medley Capital Corporation (MCC) and Sierra Income Corporation (SIC), as well as private investment vehicles. It has over $5 billion of AUM. The Company provides capital to over 300 companies across approximately 35 industries in North America. The Company’s long-dated private funds include MOF I, MOF II and MOF III. Its private funds are managed through partnership structures

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