Head-To-Head Comparison: Oppenheimer (NYSE:OPY) and Capital Southwest (NASDAQ:CSWC)

Capital Southwest (NASDAQ:CSWC) and Oppenheimer (NYSE:OPY) are both small-cap finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their earnings, dividends, institutional ownership, risk, profitability, analyst recommendations and valuation.

Dividends

Capital Southwest pays an annual dividend of $2.32 per share and has a dividend yield of 9.6%. Oppenheimer pays an annual dividend of $0.80 per share and has a dividend yield of 0.7%. Capital Southwest pays out 128.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Oppenheimer pays out 9.0% of its earnings in the form of a dividend. Capital Southwest has raised its dividend for 2 consecutive years and Oppenheimer has raised its dividend for 1 consecutive years. Capital Southwest is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Capital Southwest has a beta of 0.7, suggesting that its share price is 30% less volatile than the S&P 500. Comparatively, Oppenheimer has a beta of 1.1, suggesting that its share price is 10% more volatile than the S&P 500.

Institutional & Insider Ownership

23.4% of Capital Southwest shares are held by institutional investors. Comparatively, 32.3% of Oppenheimer shares are held by institutional investors. 2.7% of Capital Southwest shares are held by insiders. Comparatively, 34.9% of Oppenheimer shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Capital Southwest and Oppenheimer’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Capital Southwest	46.68%	13.88%	6.45%
Oppenheimer	5.72%	19.51%	4.86%

Valuation & Earnings

This table compares Capital Southwest and Oppenheimer”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Capital Southwest	$145.59 million	10.59	$113.00 million	$1.81	13.36
Oppenheimer	$1.80 billion	0.73	$148.40 million	$8.86	13.81

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

Analyst Recommendations

This is a summary of current recommendations and price targets for Capital Southwest and Oppenheimer, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Capital Southwest	0	3	6	0	2.67
Oppenheimer	0	0	2	0	3.00

Capital Southwest currently has a consensus price target of $23.60, indicating a potential downside of 2.44%. Given Capital Southwest’s higher possible upside, research analysts clearly believe Capital Southwest is more favorable than Oppenheimer.

Summary

Oppenheimer beats Capital Southwest on 10 of the 17 factors compared between the two stocks.

About Capital Southwest

Capital Southwest Corporation is a business development company specializing in credit and private equity and venture capital investments in middle market companies, mezzanine, later stage, mature, late venture, emerging growth, buyouts, industry consolidation, recapitalizations and growth capital investments. It does not invest in startups, publicly traded companies, real estate developments, project finance opportunities, oil and gas exploration businesses, troubled companies, turnarounds, and companies in which significant senior management is departing. In lower middle market, the firm typically invests in growth financing, bolt-on acquisitions, new platform acquisitions, refinancing, dividend recapitalizations, sponsor-led buyouts, and management buyouts situations. The investment structures are Unitranche debt, subordinated debt, senior debt, first and second lien debt, and preferred and common equity. The firm makes equity co-investments alongside debt investments, up to 20% of total check and only makes non-control investments. The firm is Industry agnostic, but it prefers to invest in Industrial manufacturing and services, value-added distribution, healthcare products and services, business services, specialty chemicals, food and beverage, tech-enabled services and SaaS models. The firm seeks to invest in energy services and products, industrial technologies, and specialty chemicals and products. Within energy services and products, the firm seeks to invest in each segment of the industry, including upstream, midstream and downstream, excluding exploration and production with a focus on differentiated products and services, equipment and tool rental, consumable products, and drilling and completion chemicals. Within industrial technologies, it seeks to invest in automation and process controls, handling and packaging equipment, industrial filtration and fluid handling, measurement, monitoring and testing, professional tools, and sensors and instrumentation. Within and specialty chemicals and products, the firm seeks to invest in businesses that develop and manufacture highly differentiated chemicals and products including adhesives, coatings and sealants, catalysts and absorbents, cosmeceuticals, fine chemicals, flavors and fragrances, performance lubricants, polymers, plastics and composites, chemical dispensing and filtration equipment, professional and industrial trade consumables and tools, engineered solutions for HVAC, plumbing, and electrical installations, specified high performance materials for fire protection and oilfield applications. It may also invest in exceptional opportunities in building products. The firm seeks to invest in the United States and North America. The firm seeks to make investments ranging from $5 million and $25 million in securities. It leads $5 to $70 million financings, Its Target holds of $5 million and $45 million, and the firm is willing to backstop up to $55mm with an active network of co-investors. It seeks to invest in the firm with minimum EBITDA is $3 million and $25 million. In addition to making direct investments, the firm allocates capital to syndicated first and second lien term loans in the upper middle market. Criteria for Upper Middle Market Syndicated 1st Lien is EBITDA Size more than $30 million, Closing Leverage greater than 4 times, investment hold size between $5 million and $7 million up to $15mm with senior loan fund, investment yield greater than 6.5%. Criteria for Upper Middle Market Syndicated 2nd Lien is EBITDA Size more than $50 million, Closing Leverage greater than 6 times, investment hold size between $5 million and $7 million, investment yield greater than 9%. It prefers to take a majority and minority stake. The firm has the flexibility to hold investments for very long period in its portfolio companies. It may also invest through warrants. The firm prefers to take Board participation in its portfolio companies. Capital Southwest Corporation was founded on April 19, 1961 and is based in Dallas, Texas.

About Oppenheimer

Oppenheimer Holdings Inc. operates as a middle-market investment bank and full-service broker-dealer in the Americas, Europe, the Middle East, and Asia. The company provides brokerage services covering corporate equity and debt securities, money market instruments, exchange-traded options and futures contracts, municipal bonds, mutual funds, exchange-traded funds, and unit investment trusts; financial and wealth planning services; and margin lending services. It offers asset management services, including separately managed accounts, mutual fund managed accounts, discretionary portfolio management programs, non-discretionary investment advisory and consultation services, alternative investments, portfolio enhancement programs, and institutional taxable fixed income portfolio management strategies and solutions, as well as taxable and non-taxable fixed income portfolios and strategies. In addition, the company offers investment banking services, such as strategic advisory services and capital markets products; merger and acquisition, equities capital market, debt capital market, debt advisory and restructuring, and fund placement services; and institutional equity sales and trading, equity research, equity derivatives and index options, convertible bonds, event driven sales and trading, and portfolio and electronic trading. Further, it provides institutional fixed income sales and trading, fixed income research, public finance, and municipal trading services; and proprietary trading and investment activities. Additionally, the company offers underwriting, market-making, trust, and discount services, as well as a cloud-based financial market. It serves high-net-worth individuals and families, corporate executives, public and private businesses, institutions and corporations, governments, financial sponsors, and domestic and international investors. Oppenheimer Holdings Inc. was founded in 1881 and is headquartered in New York, New York.