OFS Capital (NASDAQ:OFS) & Investcorp Credit Management BDC (NASDAQ:ICMB) Critical Review

OFS Capital (NASDAQ:OFS) and Investcorp Credit Management BDC (NASDAQ:ICMB) are both small-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, dividends, earnings, risk, institutional ownership, profitability and analyst recommendations.

Insider and Institutional Ownership

10.8% of OFS Capital shares are held by institutional investors. Comparatively, 7.8% of Investcorp Credit Management BDC shares are held by institutional investors. 0.5% of OFS Capital shares are held by insiders. Comparatively, 1.3% of Investcorp Credit Management BDC shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares OFS Capital and Investcorp Credit Management BDC’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
OFS Capital	-91.39%	6.09%	2.20%
Investcorp Credit Management BDC	-134.21%	0.86%	0.28%

Earnings and Valuation

This table compares OFS Capital and Investcorp Credit Management BDC”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
OFS Capital	$40.69 million	1.24	-$33.09 million	($2.11)	-1.79
Investcorp Credit Management BDC	$17.40 million	0.53	-$8.85 million	($1.42)	-0.45

Investcorp Credit Management BDC has lower revenue, but higher earnings than OFS Capital. OFS Capital is trading at a lower price-to-earnings ratio than Investcorp Credit Management BDC, indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

OFS Capital has a beta of 0.85, indicating that its share price is 15% less volatile than the S&P 500. Comparatively, Investcorp Credit Management BDC has a beta of 0.72, indicating that its share price is 28% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings and target prices for OFS Capital and Investcorp Credit Management BDC, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
OFS Capital	1	1	0	0	1.50
Investcorp Credit Management BDC	1	0	0	0	1.00

Summary

OFS Capital beats Investcorp Credit Management BDC on 8 of the 12 factors compared between the two stocks.

About OFS Capital

OFS Capital Corporation is a business development company specializing in direct and fund investments as well as add-on acquisitions. It provides flexible capital solutions primarily through debt capital and to a lesser extent, minority equity investments serving the needs of U.S.-based middle-market companies across a broad array of industries. It does not invest in operational turnarounds or start-up businesses. For direct, it specializes in debt and structured equity investments, recapitalizations and refinancing, management and leveraged buyouts, acquisition financings, ownership transition, shareholder liquidity events, growth capital, independent sponsor transactions, ESOPs, and minority investments in the lower middle market companies. It invests in the aerospace and defense, business services, consumer products and services, construction & building, durable goods, capital equipment, automotive, food and beverage, healthcare & pharmaceutical, specialty chemicals, transportation cargo and logistics, value added distribution, franchising, and industrial and niche manufacturing sectors. The firm invests in companies based in United States. It seeks to invest between $3 million and $35 million, revenues between $15 million and $300 million, annual EBITDA between $5 million and $50 million, and Enterprise value between $10 million and $500 million. The firm seeks to invest in companies with debt investment values between $5 million and $25 million. The fund uses senior secured, unitranche loans, first-lien, second lien, subordinated/ mezzanine loans, warrants, and preferred equity securities and common equity securities. It prefers to take a minority as well as majority stake in the investments made. It also co-invests with its partners for additional capital.

About Investcorp Credit Management BDC

Investcorp Credit Management BDC, Inc. is a business development company specializing in loan, mezzanine, middle market, growth capital, acquisitions, market/product expansion, organic growth, refinancings and recapitalization investments. It also selectively invests in mezzanine loans/structured equity and in the equity of portfolio companies through warrants and other instruments, in most cases taking such upside participation interests as part of a broader investment relationship. The fund typically invests in United States and Europe. Within United States, the fund seeks to invest in Midatlantic, Midwest, Northeast, Southeast, and West Coast regions. The fund primarily invests in cable and satellites; consumer services; healthcare equipment and services; industrials; information technology; telecommunication services; and utilities sectors. The fund seeks to invest between $5 million to $25 million in companies that have annual revenues of at least $50 million with EBITDA at least $15 million.