THL Credit (NASDAQ: TCRD) and Pennantpark Floating Rate Capital (NASDAQ:PFLT) are both small-cap finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their earnings, analyst recommendations, institutional ownership, profitability, valuation, dividends and risk.
This is a breakdown of recent recommendations and price targets for THL Credit and Pennantpark Floating Rate Capital, as provided by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Pennantpark Floating Rate Capital||0||0||3||0||3.00|
Insider & Institutional Ownership
44.8% of THL Credit shares are owned by institutional investors. Comparatively, 31.6% of Pennantpark Floating Rate Capital shares are owned by institutional investors. 9.4% of THL Credit shares are owned by insiders. Comparatively, 1.0% of Pennantpark Floating Rate Capital shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.
Volatility & Risk
THL Credit has a beta of 1.03, meaning that its stock price is 3% more volatile than the S&P 500. Comparatively, Pennantpark Floating Rate Capital has a beta of 0.6, meaning that its stock price is 40% less volatile than the S&P 500.
This table compares THL Credit and Pennantpark Floating Rate Capital’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Pennantpark Floating Rate Capital||47.64%||7.49%||4.48%|
Earnings & Valuation
This table compares THL Credit and Pennantpark Floating Rate Capital’s gross revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|THL Credit||$78.77 million||3.26||-$7.90 million||($0.24)||-32.79|
|Pennantpark Floating Rate Capital||$59.50 million||8.56||$36.32 million||$0.92||14.27|
Pennantpark Floating Rate Capital has lower revenue, but higher earnings than THL Credit. THL Credit is trading at a lower price-to-earnings ratio than Pennantpark Floating Rate Capital, indicating that it is currently the more affordable of the two stocks.
THL Credit pays an annual dividend of $1.08 per share and has a dividend yield of 13.7%. Pennantpark Floating Rate Capital pays an annual dividend of $1.14 per share and has a dividend yield of 8.7%. THL Credit pays out -450.0% of its earnings in the form of a dividend. Pennantpark Floating Rate Capital pays out 123.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. THL Credit is clearly the better dividend stock, given its higher yield and lower payout ratio.
THL Credit beats Pennantpark Floating Rate Capital on 9 of the 16 factors compared between the two stocks.
About THL Credit
THL Credit, Inc. is an externally managed, non-diversified closed-end management investment company. The Company’s investment objective is to generate both current income and capital appreciation, primarily through investments in privately negotiated debt and equity securities of lower middle market companies. The Company is a direct lender to lower middle-market companies and invests primarily in directly originated first lien senior secured loans, including unitranche investments. In certain instances, it also makes second lien secured loans and subordinated, or mezzanine, debt investments, which may include an associated equity component, such as warrants, preferred stock or similar securities, and direct equity investments. Its first lien senior secured loans may be structured as traditional first lien senior secured loans or as unitranche loans. The Company’s investment activities are managed by THL Credit Advisors LLC.
About Pennantpark Floating Rate Capital
PennantPark Floating Rate Capital Ltd. is a business development company. The Company is a closed-end, externally managed and non-diversified investment company. Its investment objectives are to generate current income and capital appreciation by investing primarily in floating rate loans and other investments made to the United States middle-market companies. It provides first lien secured debt and other opportunistic financings (senior notes, second lien, mezzanine, private high yield debt, and preferred and common stock) to middle market sponsors and companies. Its investments may include equity features, such as direct investments in the equity securities of borrowers or warrants or options to buy a minority interest in a portfolio company. It has investments in various sectors, including aerospace and defense; consumer services; healthcare and pharmaceuticals, and others. Its investment activities are managed by the investment advisor, PennantPark Investment Advisers, LLC.
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