OFS Capital Corporation (NASDAQ: OFS) and Solar Senior Capital (NASDAQ:SUNS) are both small-cap finance companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, valuation, profitability, risk, analyst recommendations, dividends and institutional ownership.

Profitability

This table compares OFS Capital Corporation and Solar Senior Capital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
OFS Capital Corporation 31.02% 9.43% 4.69%
Solar Senior Capital 76.07% 7.98% 4.22%

Volatility and Risk

OFS Capital Corporation has a beta of 0.45, indicating that its share price is 55% less volatile than the S&P 500. Comparatively, Solar Senior Capital has a beta of 0.61, indicating that its share price is 39% less volatile than the S&P 500.

Dividends

OFS Capital Corporation pays an annual dividend of $1.36 per share and has a dividend yield of 10.4%. Solar Senior Capital pays an annual dividend of $1.41 per share and has a dividend yield of 8.6%. OFS Capital Corporation pays out 125.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Solar Senior Capital pays out 94.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Earnings & Valuation

This table compares OFS Capital Corporation and Solar Senior Capital’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
OFS Capital Corporation N/A N/A N/A $1.08 12.11
Solar Senior Capital N/A N/A N/A $1.49 10.95

Solar Senior Capital is trading at a lower price-to-earnings ratio than OFS Capital Corporation, indicating that it is currently the more affordable of the two stocks.

Institutional and Insider Ownership

28.7% of OFS Capital Corporation shares are owned by institutional investors. Comparatively, 31.1% of Solar Senior Capital shares are owned by institutional investors. 0.0% of OFS Capital Corporation shares are owned by insiders. Comparatively, 5.6% of Solar Senior Capital shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Analyst Recommendations

This is a summary of current recommendations for OFS Capital Corporation and Solar Senior Capital, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
OFS Capital Corporation 1 1 3 0 2.40
Solar Senior Capital 0 1 2 0 2.67

OFS Capital Corporation currently has a consensus price target of $14.25, indicating a potential upside of 8.94%. Solar Senior Capital has a consensus price target of $17.17, indicating a potential upside of 5.19%. Given OFS Capital Corporation’s higher possible upside, research analysts plainly believe OFS Capital Corporation is more favorable than Solar Senior Capital.

Summary

Solar Senior Capital beats OFS Capital Corporation on 8 of the 13 factors compared between the two stocks.

About OFS Capital Corporation

OFS Capital Corporation (OFS Capital) is an externally managed, closed-end, non-diversified management investment company. The Company’s investment objective is to provide its shareholders with both current income and capital appreciation primarily through debt investments and equity investments. It focuses primarily on middle-market companies in the United States, including senior secured loans, including first-lien, second-lien and unitranche loans, as well as subordinated loans, and warrants and other minority equity securities. The Company may make investments directly or through OFS SBIC I, LP (SBIC I LP), its investment company subsidiary. It focuses on investments in loans, in which OFS Advisor’s investment professionals have expertise, including investments in first-lien, unitranche, second-lien, and mezzanine loans and, to a lesser extent, on warrants and other equity securities. The Company’s investment activities are managed by OFS Capital Management, LLC (OFS Advisor).

About Solar Senior Capital

Solar Senior Capital Ltd. is a closed-end, externally managed, non-diversified management investment company. The Company’s investment objective is to seek to maximize current income consistent with the preservation of capital. The Company seeks to achieve its investment objective by directly and indirectly investing in senior loans, including first lien, unitranche, and second lien debt instruments, made to private middle-market companies whose debt is rated below investment grade, which it refers to collectively as senior loans. It may also invest in debt of public companies that are thinly traded or in equity securities. Under normal market conditions, at least 80% of the value of its net assets (including the amount of any borrowings for investment purposes) will be invested in senior loans. It invests in privately held the United States middle-market companies. Its investment activities are managed by Solar Capital Partners, LLC (Solar Capital Partners or the Investment Advisor).

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