Head-To-Head Review: Stellus Capital Investment (NYSE:SCM) & Franklin Resources (NYSE:BEN)

Franklin Resources (NYSE:BEN) and Stellus Capital Investment (NYSE:SCM) are both finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their risk, earnings, valuation, analyst recommendations, institutional ownership, profitability and dividends.

Institutional & Insider Ownership

47.6% of Franklin Resources shares are held by institutional investors. Comparatively, 13.2% of Stellus Capital Investment shares are held by institutional investors. 23.4% of Franklin Resources shares are held by company insiders. Comparatively, 4.2% of Stellus Capital Investment shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Earnings & Valuation

This table compares Franklin Resources and Stellus Capital Investment”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Franklin Resources	$8.77 billion	1.85	$524.90 million	$1.47	21.76
Stellus Capital Investment	$102.14 million	2.00	$27.05 million	$1.02	7.02

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

Dividends

Franklin Resources pays an annual dividend of $1.32 per share and has a dividend yield of 4.1%. Stellus Capital Investment pays an annual dividend of $1.00 per share and has a dividend yield of 14.0%. Franklin Resources pays out 89.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Stellus Capital Investment pays out 98.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Franklin Resources has increased its dividend for 45 consecutive years.

Volatility & Risk

Franklin Resources has a beta of 1.54, indicating that its share price is 54% more volatile than the S&P 500. Comparatively, Stellus Capital Investment has a beta of 0.71, indicating that its share price is 29% less volatile than the S&P 500.

Analyst Ratings

This is a summary of current recommendations and price targets for Franklin Resources and Stellus Capital Investment, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Franklin Resources	1	6	4	0	2.27
Stellus Capital Investment	1	2	1	0	2.00

Franklin Resources presently has a consensus target price of $35.89, indicating a potential upside of 12.22%. Stellus Capital Investment has a consensus target price of $9.25, indicating a potential upside of 29.19%. Given Stellus Capital Investment’s higher probable upside, analysts clearly believe Stellus Capital Investment is more favorable than Franklin Resources.

Profitability

This table compares Franklin Resources and Stellus Capital Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Franklin Resources	8.72%	11.55%	4.46%
Stellus Capital Investment	30.66%	9.09%	3.32%

Summary

Franklin Resources beats Stellus Capital Investment on 13 of the 17 factors compared between the two stocks.

About Franklin Resources

Franklin Resources, Inc. is a publicly owned asset management holding company. Through its subsidiaries, the firm provides its services to individuals, institutions, pension plans, trusts, and partnerships. It launches equity, fixed income, balanced, and multi-asset mutual funds through its subsidiaries. The firm invests in the public equity, fixed income, and alternative markets. Franklin Resources, Inc. was founded in 1947 and is based in San Mateo, California with an additional office in Calgary, Canada; Dubai, United Arab Emirates; Edinburgh, United Kingdom; Fort Lauderdale, United States; Hyderabad, India; London, United Kingdom; Rancho Cordova, United states; Shanghai, China; Singapore; Stamford, United States; and Vienna, Austria.

About Stellus Capital Investment

Stellus Capital Investment Corporation is a business development company specializing in investments in private middle-market companies. It invests through first lien, second lien, unitranche, and mezzanine debt financing, often with a corresponding equity investment. The fund prefers to invest in US and Canada. The fund seeks to invest in companies with an EBITDA between $5 million and $50 million.