Critical Analysis: Hercules Capital (NYSE:HTGC) & U.S. Global Investors (NASDAQ:GROW)

Hercules Capital (NYSE:HTGC) and U.S. Global Investors (NASDAQ:GROW) are both finance companies, but which is the better business? We will compare the two companies based on the strength of their analyst recommendations, institutional ownership, valuation, earnings, risk, dividends and profitability.

Dividends

Hercules Capital pays an annual dividend of $1.60 per share and has a dividend yield of 10.1%. U.S. Global Investors pays an annual dividend of $0.09 per share and has a dividend yield of 3.4%. Hercules Capital pays out 86.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. U.S. Global Investors pays out 36.0% of its earnings in the form of a dividend. Hercules Capital has increased its dividend for 1 consecutive years. Hercules Capital is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Hercules Capital and U.S. Global Investors, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Hercules Capital	0	2	5	1	2.88
U.S. Global Investors	0	1	0	0	2.00

Hercules Capital presently has a consensus price target of $18.89, suggesting a potential upside of 18.94%. Given Hercules Capital’s stronger consensus rating and higher probable upside, analysts plainly believe Hercules Capital is more favorable than U.S. Global Investors.

Valuation and Earnings

This table compares Hercules Capital and U.S. Global Investors”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Hercules Capital	$532.49 million	5.65	$339.74 million	$1.86	8.54
U.S. Global Investors	$10.25 million	3.16	$3.06 million	$0.25	10.54

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

Institutional & Insider Ownership

19.7% of Hercules Capital shares are owned by institutional investors. Comparatively, 23.6% of U.S. Global Investors shares are owned by institutional investors. 2.0% of Hercules Capital shares are owned by insiders. Comparatively, 19.2% of U.S. Global Investors shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Volatility and Risk

Hercules Capital has a beta of 0.82, indicating that its share price is 18% less volatile than the S&P 500. Comparatively, U.S. Global Investors has a beta of 0.66, indicating that its share price is 34% less volatile than the S&P 500.

Profitability

This table compares Hercules Capital and U.S. Global Investors’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Hercules Capital	62.84%	15.72%	7.46%
U.S. Global Investors	29.81%	6.70%	6.30%

Summary

Hercules Capital beats U.S. Global Investors on 14 of the 18 factors compared between the two stocks.

About Hercules Capital

Hercules Capital, Inc. is a specialty finance company and business development company that provides financing to venture capital-backed businesses. Its lending focuses primarily on companies in the technology, life sciences and sustainable and renewable technology sectors. The company offers venture debt and growth capital through products such as senior secured loans, equipment financing and working capital facilities. Its financing is designed to support businesses at different stages, including product development, expansion and other growth initiatives.

About U.S. Global Investors

U.S. Global Investors, Inc. (NASDAQ:GROW) is an investment management company headquartered in San Antonio, Texas. The company provides investment advisory and management services to mutual funds, exchange-traded funds and other investment accounts. Its investment products focus on specialized areas of the global economy, including natural resources, precious metals, emerging markets, global infrastructure, airlines and maritime transportation. The company also offers separately managed accounts and related shareholder and fund administration services.