Full Circle Capital (NASDAQ: FULL) and FS Investment (NYSE:FSIC) are both financials companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, risk, institutional ownership, dividends, earnings, analyst recommendations and profitability.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Full Circle Capital and FS Investment, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Full Circle Capital 0 0 0 0 N/A
FS Investment 0 4 0 0 2.00

FS Investment has a consensus price target of $9.67, suggesting a potential upside of 18.61%. Given FS Investment’s higher probable upside, analysts plainly believe FS Investment is more favorable than Full Circle Capital.

Valuation and Earnings

This table compares Full Circle Capital and FS Investment’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Full Circle Capital N/A N/A N/A ($0.42) -6.36
FS Investment $422.81 million 4.74 $294.29 million $0.89 9.16

FS Investment has higher revenue and earnings than Full Circle Capital. Full Circle Capital is trading at a lower price-to-earnings ratio than FS Investment, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Full Circle Capital and FS Investment’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Full Circle Capital -11.16% -1.78% -1.24%
FS Investment 52.49% 8.97% 4.96%

Insider & Institutional Ownership

32.6% of FS Investment shares are held by institutional investors. 1.0% of FS Investment shares are held by company 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.

Dividends

Full Circle Capital pays an annual dividend of $0.17 per share and has a dividend yield of 6.4%. FS Investment pays an annual dividend of $0.89 per share and has a dividend yield of 10.9%. Full Circle Capital pays out -40.5% of its earnings in the form of a dividend. FS Investment 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.

Summary

FS Investment beats Full Circle Capital on 9 of the 10 factors compared between the two stocks.

Full Circle Capital Company Profile

Full Circle Capital Corporation is a 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. The Company invests primarily in senior secured loans and second lien loans, mezzanine loans and equity securities issued by lower middle-market and middle-market companies that operate in a range of industries. In its lending activities, the Company focuses primarily on portfolio companies with both tangible and intangible assets available as collateral and security against its loan to help mitigate its risk of loss, and cash flow to cover debt service. The Company focuses primarily on senior secured loans and stretch senior secured loans (unitranche loans), which combine characteristics of first-lien senior secured loans and second-lien or subordinated loans. The Company’s investment advisor is Full Circle Advisors, LLC (Full Circle Advisors).

FS Investment Company Profile

FS Investment Corporation is an externally managed, non-diversified, closed-end management investment company. The Company’s investment objectives are to generate current income and long-term capital appreciation. Its portfolio consists primarily of investments in senior secured loans and second lien secured loans of the private United States middle market companies and subordinated loans of the private United States companies. It may purchase interests in loans or make other debt investments, including investments in senior secured bonds, through secondary market transactions in the over-the-counter market or directly from target companies as primary market or directly originated investments. It invests in a range of industries, including capital goods; consumer services; consumer durables and apparel; materials; commercial and professional services, and diversified financials. Its investment advisor is FB Income Advisor, LLC.

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