Critical Comparison: PhenixFIN (NYSE:PFX) & MidCap Financial Investment (NASDAQ:MFIC)

MidCap Financial Investment (NASDAQ:MFIC) and PhenixFIN (NYSE:PFX) are both small-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, valuation, dividends, profitability, earnings, analyst recommendations and risk.

Dividends

MidCap Financial Investment pays an annual dividend of $1.24 per share and has a dividend yield of 14.8%. PhenixFIN pays an annual dividend of $0.48 per share and has a dividend yield of 1.1%. MidCap Financial Investment pays out -344.4% of its earnings in the form of a dividend. PhenixFIN pays out 19.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. MidCap Financial Investment is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk and Volatility

MidCap Financial Investment has a beta of 0.62, meaning that its stock price is 38% less volatile than the S&P 500. Comparatively, PhenixFIN has a beta of 0.32, meaning that its stock price is 68% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current recommendations for MidCap Financial Investment and PhenixFIN, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
MidCap Financial Investment	1	6	1	0	2.00
PhenixFIN	0	1	0	0	2.00

MidCap Financial Investment presently has a consensus target price of $10.54, indicating a potential upside of 25.72%. Given MidCap Financial Investment’s higher probable upside, analysts plainly believe MidCap Financial Investment is more favorable than PhenixFIN.

Valuation & Earnings

This table compares MidCap Financial Investment and PhenixFIN”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
MidCap Financial Investment	$320.88 million	2.15	$63.17 million	($0.36)	-23.28
PhenixFIN	$14.16 million	5.80	$18.62 million	$2.41	17.64

MidCap Financial Investment has higher revenue and earnings than PhenixFIN. MidCap Financial Investment is trading at a lower price-to-earnings ratio than PhenixFIN, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares MidCap Financial Investment and PhenixFIN’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
MidCap Financial Investment	-9.85%	11.17%	4.41%
PhenixFIN	72.98%	2.95%	1.68%

Institutional and Insider Ownership

28.4% of MidCap Financial Investment shares are held by institutional investors. Comparatively, 43.3% of PhenixFIN shares are held by institutional investors. 0.9% of MidCap Financial Investment shares are held by company insiders. Comparatively, 25.2% of PhenixFIN shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Summary

MidCap Financial Investment beats PhenixFIN on 10 of the 15 factors compared between the two stocks.

About MidCap Financial Investment

MidCap Financial Investment Corporation (Former name Apollo Investment Corporation) is business development company and a closed-end, externally managed, non-diversified management investment company. It is elected to be treated as a business development company (BDC) under the Investment Company Act of 1940 (the 1940 Act) specializing in private equity investments in leveraged buyouts, acquisitions, recapitalizations, growth capital, refinancing and private middle market companies. It provides direct equity capital, mezzanine, first lien secured loans, stretch senior loans, unitranche loans, second lien secured loans and senior secured loans, unsecured debt, and subordinated debt and loans. It also seeks to invest in PIPES transactions. The fund may also invest in securities of public companies that are thinly traded and may acquire investments in the secondary market and structured products. It prefers to invest in preferred equity, common equity / interests and warrants and makes equity co-investments. It may invest in cash equivalents, U.S. government securities, high-quality debt investments that mature in one year or less, high-yield bonds, distressed debt, non-U.S. investments, or securities of public companies that are not thinly traded. It also focuses on other investments such as collateralized loan obligations (CLOs) and credit-linked notes (CLNs). The fund typically invests in construction and building materials, business services, plastics & rubber, advertising, capital equipment, education, cable television, chemicals, consumer products/goods durable and non-durable and customer services, direct marketing, energy oil & gas, electricity and utilities. The fund also invest in aerospace & defense, wholesale, telecommunications, financial services, hotel, gaming, leisure, restaurants; environmental industries, healthcare and pharmaceuticals, high tech industries, beverages, food and tobacco, manufacturing, media diversified & production, printing and publishing, retail, automation, aviation and consumer transport, transportation, cargo and distribution. It primarily invests in United States. It primarily invests between $20 million and $250 million in its portfolio companies and EBITDA with less than $75 million. The fund seeks to make investments with stated maturities of five to 10 years.

About PhenixFIN

PhenixFIN Corporation is a business development company. The firm seeks to invest in privately negotiated debt and equity securities of small and middle market companies. It primarily invests in the following sectors: business services; buildings and real estate; automobile; oil and gas; aerospace and defense; home and office furnishings, housewares, and durable consumer products; healthcare, education and childcare; personal, food, and miscellaneous services; retail stores, diversified or conglomerate manufacturing; telecommunications; mining, steel, iron, and non-precious metals; leisure, amusement, motion pictures, and entertainment; chemicals, plastics, and rubber; finance; personal and nondurable consumer products (manufacturing only); beverage, food, and tobacco; containers, packaging, and glass; structure finance securities; machinery (non-agriculture, non-construction, non-electric); diversified or conglomerate service; restaurant and franchise; electronics; and cargo transport. The fund seeks to invest in companies located in North America. The fund targets private debt transactions in companies with enterprise values or asset values between $25 million and $250 million. The fund seeks to invest in companies with debt investment values between $10 million and $50 million. It exits its investments between three years and seven years; it holds most of its investments to maturity or repayment, but may realize or sell some investments earlier. The fund may take a board seat on its investee companies and can also offer managerial assistance to certain portfolio companies. It structures its investments as first lien senior secured loans, second lien senior secured loans, senior secured notes, senior subordinated notes, subordinate notes, unitranche loans, and seeks warrants or other equity participation. The fund may co-invest in privately negotiated transactions under certain conditions. PhenixFIN Corporation was founded in 2010 and is headquartered in New York, New York.