Financial Analysis: SWK (NASDAQ:SWKH) & Rithm Capital (NYSE:RITM)

SWK (NASDAQ:SWKH) and Rithm Capital (NYSE:RITM) are both finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their risk, earnings, valuation, institutional ownership, dividends, analyst recommendations and profitability.

Volatility and Risk

SWK has a beta of 0.27, meaning that its share price is 73% less volatile than the S&P 500. Comparatively, Rithm Capital has a beta of 1.19, meaning that its share price is 19% more volatile than the S&P 500.

Insider and Institutional Ownership

99.3% of SWK shares are owned by institutional investors. Comparatively, 44.9% of Rithm Capital shares are owned by institutional investors. 1.3% of SWK shares are owned by company insiders. Comparatively, 0.4% of Rithm Capital shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current ratings for SWK and Rithm Capital, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
SWK	0	2	0	0	2.00
Rithm Capital	0	1	7	0	2.88

SWK currently has a consensus target price of $18.00, suggesting a potential upside of 13.21%. Rithm Capital has a consensus target price of $14.06, suggesting a potential upside of 39.30%. Given Rithm Capital’s stronger consensus rating and higher possible upside, analysts plainly believe Rithm Capital is more favorable than SWK.

Profitability

This table compares SWK and Rithm Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
SWK	-6.11%	0.22%	0.19%
Rithm Capital	15.55%	19.74%	2.94%

Valuation and Earnings

This table compares SWK and Rithm Capital”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
SWK	$41.46 million	4.64	-$2.53 million	$1.86	8.55
Rithm Capital	$4.59 billion	1.23	$681.45 million	$1.04	9.71

Rithm Capital has higher revenue and earnings than SWK. SWK is trading at a lower price-to-earnings ratio than Rithm Capital, indicating that it is currently the more affordable of the two stocks.

Summary

Rithm Capital beats SWK on 10 of the 14 factors compared between the two stocks.

About SWK

SWK Holdings Corporation, offers specialty finance and asset management services in the United States. It operates in two segments, Finance Receivables and Pharmaceutical Development. The Finance Receivables segment provides customized financing solutions to a range of life science companies, including companies in the biotechnology, medical device, medical diagnostics and related tools, animal health, and pharmaceutical industries, as well as institutions and inventors. This segment also offers non-discretionary investment advisory services to institutional clients in separately managed accounts to invest in life science finance. The Pharmaceutical Development segment provides customers pharmaceutical development, formulation, and manufacturing services, as well as formulation solutions built around its proprietary oral drug delivery technologies, the Peptelligence platform. It also offers intellectual property licensing business. The company was formerly known as Kana Software, Inc. and changed its name to SWK Holdings Corporation in December 2009. SWK Holdings Corporation was incorporated in 1996 and is headquartered in Dallas, Texas.

About Rithm Capital

Rithm Capital Corp. operates as an asset manager focused on real estate, credit, and financial services. It operates through Origination and Servicing, Investment Portfolio, Mortgage Loans Receivable, and Asset Management segments. Its investment portfolio primarily comprises of mortgage servicing rights (MSR), and MSR financing receivables, title, appraisal and property preservation, excess MSRs, and services advance investments; real estate securities, call rights, SFR properties, and residential mortgage loans; consumer and business purpose loans; and asset management related investments. The company qualifies as a real estate investment trust for federal income tax purposes. It generally would not be subject to federal corporate income taxes if it distributes at least 90% of its taxable income to its stockholders. The company was formerly known as New Residential Investment Corp. and changed its name to Rithm Capital Corp. in August 2022. Rithm Capital Corp. was incorporated in 2011 and is based in New York, New York.