Critical Contrast: AFC Gamma (NASDAQ:AFCG) & MSC Income Fund (NYSE:MSIF)

MSC Income Fund (NYSE:MSIF) and AFC Gamma (NASDAQ:AFCG) are both small-cap finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their dividends, analyst recommendations, institutional ownership, valuation, earnings, profitability and risk.

Profitability

This table compares MSC Income Fund and AFC Gamma’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
MSC Income Fund	N/A	N/A	N/A
AFC Gamma	15.64%	2.85%	1.50%

Institutional & Insider Ownership

26.5% of AFC Gamma shares are held by institutional investors. 0.5% of MSC Income Fund shares are held by insiders. Comparatively, 30.7% of AFC Gamma shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Earnings and Valuation

This table compares MSC Income Fund and AFC Gamma”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
MSC Income Fund	$110.26 million	5.35	$93.36 million	$1.98	6.32
AFC Gamma	$31.32 million	2.48	-$20.67 million	$1.04	3.30

MSC Income Fund has higher revenue and earnings than AFC Gamma. AFC Gamma is trading at a lower price-to-earnings ratio than MSC Income Fund, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for MSC Income Fund and AFC Gamma, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
MSC Income Fund	0	3	3	1	2.71
AFC Gamma	1	1	0	0	1.50

MSC Income Fund currently has a consensus price target of $14.10, indicating a potential upside of 12.62%. Given MSC Income Fund’s stronger consensus rating and higher possible upside, analysts plainly believe MSC Income Fund is more favorable than AFC Gamma.

Dividends

MSC Income Fund pays an annual dividend of $1.32 per share and has a dividend yield of 10.5%. AFC Gamma pays an annual dividend of $0.20 per share and has a dividend yield of 5.8%. MSC Income Fund pays out 66.7% of its earnings in the form of a dividend. AFC Gamma pays out 19.2% 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.

Summary

MSC Income Fund beats AFC Gamma on 10 of the 16 factors compared between the two stocks.

About AFC Gamma

AFC Gamma, Inc. originates, structures, underwrites, and invests in senior secured loans, and other various commercial real estate loans and debt securities for established companies operating in the cannabis industry. It primarily originates loans structured as senior loans secured by real estate, equipment, and licenses and/or other assets of the loan parties to the extent permitted by applicable laws and the regulations governing such loan parties. The company has elected and qualified to be taxed as a real estate investment trust for the United States federal income tax purposes under the Internal Revenue Code of 1986. AFC Gamma, Inc. was incorporated in 2020 and is based in West Palm Beach, Florida.