Medley Capital Corporation (NYSE: MCC) and Eagle Point Credit (NYSE:ECC) are both small-cap finance companies, but which is the better business? We will compare the two companies based on the strength of their dividends, profitability, valuation, institutional ownership, risk, earnings and analyst recommendations.

Dividends

Medley Capital Corporation pays an annual dividend of $0.64 per share and has a dividend yield of 10.6%. Eagle Point Credit pays an annual dividend of $2.40 per share and has a dividend yield of 11.4%. Medley Capital Corporation pays out -640.0% of its earnings in the form of a dividend. Eagle Point Credit pays out 46.2% 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.

Valuation and Earnings

This table compares Medley Capital Corporation and Eagle Point Credit’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Medley Capital Corporation N/A N/A N/A ($0.10) -60.60
Eagle Point Credit N/A N/A N/A $5.20 4.06

Medley Capital Corporation is trading at a lower price-to-earnings ratio than Eagle Point Credit, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Medley Capital Corporation and Eagle Point Credit’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Medley Capital Corporation -6.07% 8.04% 3.92%
Eagle Point Credit 134.32% N/A N/A

Insider & Institutional Ownership

29.6% of Medley Capital Corporation shares are held by institutional investors. Comparatively, 58.3% of Eagle Point Credit shares are held by institutional investors. 8.7% of Medley Capital Corporation shares are held by insiders. Comparatively, 0.7% of Eagle Point Credit shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Volatility and Risk

Medley Capital Corporation has a beta of 1.18, indicating that its stock price is 18% more volatile than the S&P 500. Comparatively, Eagle Point Credit has a beta of 0.34, indicating that its stock price is 66% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Medley Capital Corporation and Eagle Point Credit, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Medley Capital Corporation 0 5 0 0 2.00
Eagle Point Credit 0 0 4 0 3.00

Medley Capital Corporation currently has a consensus target price of $7.00, suggesting a potential upside of 15.51%. Eagle Point Credit has a consensus target price of $22.83, suggesting a potential upside of 8.21%. Given Medley Capital Corporation’s higher probable upside, research analysts plainly believe Medley Capital Corporation is more favorable than Eagle Point Credit.

Summary

Eagle Point Credit beats Medley Capital Corporation on 7 of the 13 factors compared between the two stocks.

Medley Capital Corporation Company Profile

Medley Capital Corporation is a non-diversified closed-end management investment company. The Company’s investment objective is to generate current income and capital appreciation by lending directly to privately-held middle market companies, primarily through directly originated transactions to help these companies expand their business, refinance and make acquisitions. Its investment portfolio includes senior secured first lien term loans, senior secured second lien term loans, unitranche, senior secured first lien notes, subordinated notes and warrants and minority equity securities. It may invest up to 100% of its assets in securities acquired directly from issuers in privately negotiated transactions. Its portfolio of investments includes industries, including banking, finance, insurance and real estate; construction and building; healthcare and pharmaceuticals; beverage and food, and telecommunications. MCC Advisors LLC is the Company’s investment advisor.

Eagle Point Credit Company Profile

Eagle Point Credit Company Inc. is a non-diversified, closed-end management investment company. The Company’s primary investment objective is to generate high current income, with a secondary objective to generate capital appreciation. The Company primarily invests in equity and junior debt tranches of collateralized loan obligations (CLOs) that are collateralized by a portfolio consisting primarily of the below investment grade United States senior secured loans. It may also invest in other securities and instruments related to these investments. The Company’s portfolio includes its investments in various industries, such as business equipment and services; healthcare; electronics/electrical; leisure goods/activities/movies; retailers (except food and drug); chemicals and plastics; telecommunications; financial intermediaries, and utilities. The Company’s advisor is Eagle Point Credit Management LLC.

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