Critical Review: Enova International (ENVA) and Stellus Capital Investment (SCM)

Enova International (NYSE: ENVA) and Stellus Capital Investment (NYSE:SCM) are both small-cap finance companies, but which is the superior investment? We will compare the two companies based on the strength of their earnings, dividends, valuation, analyst recommendations, institutional ownership, risk and profitability.

Valuation and Earnings

This table compares Enova International and Stellus Capital Investment’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Enova International $843.74 million 0.87 $29.24 million $0.86 25.29
Stellus Capital Investment $39.65 million 4.75 $22.61 million $1.53 7.73

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

Insider and Institutional Ownership

94.9% of Enova International shares are held by institutional investors. Comparatively, 28.9% of Stellus Capital Investment shares are held by institutional investors. 1.6% of Enova International shares are held by insiders. Comparatively, 4.2% of Stellus Capital Investment shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Dividends

Stellus Capital Investment pays an annual dividend of $1.36 per share and has a dividend yield of 11.5%. Enova International does not pay a dividend. Stellus Capital Investment pays out 88.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Analyst Recommendations

This is a breakdown of current recommendations for Enova International and Stellus Capital Investment, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Enova International 0 0 4 0 3.00
Stellus Capital Investment 0 1 2 0 2.67

Enova International currently has a consensus price target of $24.25, suggesting a potential upside of 11.49%. Stellus Capital Investment has a consensus price target of $14.17, suggesting a potential upside of 19.85%. Given Stellus Capital Investment’s higher possible upside, analysts clearly believe Stellus Capital Investment is more favorable than Enova International.

Volatility & Risk

Enova International has a beta of 2.94, indicating that its share price is 194% more volatile than the S&P 500. Comparatively, Stellus Capital Investment has a beta of 0.53, indicating that its share price is 47% less volatile than the S&P 500.

Profitability

This table compares Enova International and Stellus Capital Investment’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Enova International 3.47% 14.11% 3.59%
Stellus Capital Investment 57.04% 8.67% 4.83%

Summary

Enova International beats Stellus Capital Investment on 9 of the 16 factors compared between the two stocks.

About Enova International

Enova International, Inc. is a technology and analytics company. The Company provides online financial services. As of December 31, 2016, the Company offered or arranged loans to consumers in 33 states in the United States and in the United Kingdom and Brazil. As of December 31, 2016, it also offered financing to small businesses in all 50 states and Washington D.C. in the United States. The Company provides online financial services to non-prime credit consumers and small businesses in the United States, United Kingdom, and Brazil. Its customers include small businesses, which have bank accounts but use alternative financial services because of their limited access to more traditional credit from banks, credit card companies and other lenders. The Company’s financing products include short-term loans, line of credit accounts, installment loans and receivables purchase agreements (RPAs).

About Stellus Capital Investment

Stellus Capital Investment Corporation is a closed-end, non-diversified management investment company. The Company originates and invests primarily in private middle-market companies through first lien, second lien, unitranche and mezzanine debt financing, with corresponding equity co-investments. The Company’s investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation. It invests in various sectors, such as business services, energy, general industrial, government services, healthcare, software and specialty finance. Its investment advisor is Stellus Capital Management, LLC (Stellus Capital Management). Stellus Capital Management is responsible for analyzing investment opportunities, conducting research and performing due diligence on investments, negotiating and structuring the Company’s investments, originating prospective investments, and monitoring its investments and portfolio companies on an ongoing basis.

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