Prospect Capital (PSEC) and Hercules Capital (HTGC) Financial Review
Prospect Capital (NASDAQ: PSEC) and Hercules Capital (NYSE:HTGC) are both financials companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, analyst recommendations, profitability, institutional ownership, valuation, risk and dividends.
Insider and Institutional Ownership
14.3% of Prospect Capital shares are held by institutional investors. Comparatively, 37.7% of Hercules Capital shares are held by institutional investors. 7.1% of Prospect Capital shares are held by company insiders. Comparatively, 3.2% of Hercules Capital shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.
This is a breakdown of recent recommendations and price targets for Prospect Capital and Hercules Capital, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Prospect Capital currently has a consensus price target of $6.50, suggesting a potential downside of 2.99%. Hercules Capital has a consensus price target of $14.43, suggesting a potential upside of 17.14%. Given Hercules Capital’s stronger consensus rating and higher probable upside, analysts plainly believe Hercules Capital is more favorable than Prospect Capital.
Prospect Capital pays an annual dividend of $0.72 per share and has a dividend yield of 10.7%. Hercules Capital pays an annual dividend of $1.24 per share and has a dividend yield of 10.1%. Prospect Capital pays out 126.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Hercules Capital pays out 136.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Prospect Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.
Risk and Volatility
Prospect Capital has a beta of 0.48, indicating that its share price is 52% less volatile than the S&P 500. Comparatively, Hercules Capital has a beta of 0.74, indicating that its share price is 26% less volatile than the S&P 500.
Earnings & Valuation
This table compares Prospect Capital and Hercules Capital’s gross revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Prospect Capital||$701.05 million||3.46||$252.90 million||$0.57||11.75|
|Hercules Capital||$175.05 million||5.92||$68.70 million||$0.91||13.54|
Prospect Capital has higher revenue and earnings than Hercules Capital. Prospect Capital is trading at a lower price-to-earnings ratio than Hercules Capital, indicating that it is currently the more affordable of the two stocks.
This table compares Prospect Capital and Hercules Capital’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
Hercules Capital beats Prospect Capital on 11 of the 16 factors compared between the two stocks.
About Prospect Capital
Prospect Capital Corporation is a financial services company. The Company primarily lends to and invests in middle market privately held companies. The Company is a closed-end investment company. Its investment objective is to generate both current income and long-term capital appreciation through debt and equity investments. The Company invests primarily in senior and subordinated debt and equity of private companies in need of capital for acquisitions, divestitures, growth, development, recapitalizations and other purposes. The Company makes investments, including lending in private equity sponsored transactions, lending directly to companies not owned by private equity firms, control investments in corporate operating companies, control investments in financial companies, investments in structured credit, real estate investments, investments in syndicated debt, aircraft leasing and online lending. The Company is managed by its investment advisor, Prospect Capital Management L.P.
About Hercules Capital
Hercules Capital, Inc. is a specialty finance company. The Company is an internally managed, non-diversified, closed-end investment company. The Company focuses on providing senior secured venture growth loans to venture capital-backed companies in a range of technology, life sciences, and sustainable and renewable technology industries. The Company’s investment objective is to maximize its portfolio total return by generating current income from its debt investments and capital appreciation from its warrant and equity-related investments. The Company’s primary business objectives are to increase its net income, net operating income and net asset value (NAV) by investing in structured debt with warrants and equity of venture capital-backed companies in technology-related industries with attractive current yields and the potential for equity appreciation and realized gains. The Company focuses its investments in companies active in the technology industry sub-sectors.
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