Critical Comparison: WhiteHorse Finance (NASDAQ:WHF) & Runway Growth Finance (NASDAQ:RWAY)

Runway Growth Finance (NASDAQ:RWAY) and WhiteHorse Finance (NASDAQ:WHF) are both small-cap finance companies, but which is the better investment? We will compare the two companies based on the strength of their earnings, institutional ownership, analyst recommendations, risk, valuation, dividends and profitability.

Volatility & Risk

Runway Growth Finance has a beta of 0.64, meaning that its share price is 36% less volatile than the S&P 500. Comparatively, WhiteHorse Finance has a beta of 0.41, meaning that its share price is 59% less volatile than the S&P 500.

Dividends

Runway Growth Finance pays an annual dividend of $1.32 per share and has a dividend yield of 19.8%. WhiteHorse Finance pays an annual dividend of $1.00 per share and has a dividend yield of 13.7%. Runway Growth Finance pays out -1,466.7% of its earnings in the form of a dividend. WhiteHorse Finance pays out 243.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. WhiteHorse Finance has raised its dividend for 3 consecutive years. Runway Growth Finance is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation & Earnings

This table compares Runway Growth Finance and WhiteHorse Finance”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Runway Growth Finance	$137.33 million	2.06	$34.05 million	($0.09)	-73.89
WhiteHorse Finance	$72.67 million	2.17	$14.34 million	$0.41	17.78

Runway Growth Finance has higher revenue and earnings than WhiteHorse Finance. Runway Growth Finance is trading at a lower price-to-earnings ratio than WhiteHorse Finance, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of recent ratings for Runway Growth Finance and WhiteHorse Finance, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Runway Growth Finance	1	4	2	0	2.14
WhiteHorse Finance	2	3	0	0	1.60

Runway Growth Finance presently has a consensus price target of $8.88, suggesting a potential upside of 33.46%. WhiteHorse Finance has a consensus price target of $7.75, suggesting a potential upside of 6.31%. Given Runway Growth Finance’s stronger consensus rating and higher possible upside, analysts clearly believe Runway Growth Finance is more favorable than WhiteHorse Finance.

Institutional and Insider Ownership

64.6% of Runway Growth Finance shares are owned by institutional investors. Comparatively, 13.2% of WhiteHorse Finance shares are owned by institutional investors. 1.0% of Runway Growth Finance shares are owned by insiders. Comparatively, 2.5% of WhiteHorse Finance shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Runway Growth Finance and WhiteHorse Finance’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Runway Growth Finance	-2.00%	10.87%	5.37%
WhiteHorse Finance	13.46%	9.47%	3.95%

Summary

Runway Growth Finance beats WhiteHorse Finance on 11 of the 17 factors compared between the two stocks.

About Runway Growth Finance

Runway Growth Finance Corp. is a business development company specializing investments in senior-secured loans to late stage and growth companies. It prefers to make investments in companies engaged in the technology, life sciences, healthcare and information services, business services and select consumer services and products sectors. It prefers to investments in companies engaged in electronic equipment and instruments, systems software, hardware, storage and peripherals and specialized consumer services, application software, healthcare technology, internet software and services, data processing and outsourced services, internet retail, human resources and employment services, biotechnology, healthcare equipment and education services. It invests in senior secured loans between $10 million and $75 million.

About WhiteHorse Finance

WhiteHorse Finance, Inc. is business development company, non-diversified, closed end management company specializing in originating senior secured loans, lower middle market, growth capital industries. It invests in broadline retail, office services and supplies, building products, health care services, health care supplies, research and consulting services, application software, home furnishings, specialized consumer services, data processing and outsourced services, leisure facilities, cable, and satellite. It prefers to invest in United States. It typically invests between $5 million to $25 million in companies having enterprise value of between $50 million and $350 million.