Contrasting Alcentra Capital (ABDC) & Legg Mason (LM)

Alcentra Capital (NASDAQ: ABDC) and Legg Mason (NYSE:LM) are both finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their institutional ownership, earnings, risk, profitability, dividends, valuation and analyst recommendations.

Institutional & Insider Ownership

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35.2% of Alcentra Capital shares are owned by institutional investors. Comparatively, 91.5% of Legg Mason shares are owned by institutional investors. 5.0% of Alcentra Capital shares are owned by company insiders. Comparatively, 12.7% of Legg Mason shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Analyst Ratings

This is a summary of current ratings and recommmendations for Alcentra Capital and Legg Mason, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Alcentra Capital 1 2 1 0 2.00
Legg Mason 2 4 3 0 2.11

Alcentra Capital presently has a consensus price target of $12.00, indicating a potential upside of 67.60%. Legg Mason has a consensus price target of $47.33, indicating a potential upside of 19.77%. Given Alcentra Capital’s higher possible upside, equities analysts clearly believe Alcentra Capital is more favorable than Legg Mason.

Valuation & Earnings

This table compares Alcentra Capital and Legg Mason’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Alcentra Capital $33.35 million 3.05 -$19.10 million $1.32 5.42
Legg Mason $2.89 billion 1.16 $227.25 million $3.32 11.90

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

Profitability

This table compares Alcentra Capital and Legg Mason’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Alcentra Capital -57.28% 10.56% 6.19%
Legg Mason 11.43% 8.21% 3.98%

Dividends

Alcentra Capital pays an annual dividend of $0.72 per share and has a dividend yield of 10.1%. Legg Mason pays an annual dividend of $1.12 per share and has a dividend yield of 2.8%. Alcentra Capital pays out 54.5% of its earnings in the form of a dividend. Legg Mason pays out 33.7% 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. Legg Mason has raised its dividend for 8 consecutive years.

Volatility & Risk

Alcentra Capital has a beta of 0.57, indicating that its share price is 43% less volatile than the S&P 500. Comparatively, Legg Mason has a beta of 2.05, indicating that its share price is 105% more volatile than the S&P 500.

Summary

Legg Mason beats Alcentra Capital on 12 of the 17 factors compared between the two stocks.

Alcentra Capital Company Profile

Alcentra Capital Corporation is a specialty finance company that operates as a non-diversified, closed-end management investment company. The Company operates as a business development company and a regulated investment company. It provides customized debt and equity financing solutions to lower middle-market companies, which are companies having annual earnings, before interest, taxes, depreciation and amortization of between $5 million and $15 million, and/or revenues of between $10 million and $100 million. Its investments range in size from $5 million to $15 million. Its investment objective is to generate both current income and capital appreciation primarily by making direct investments in lower middle-market companies in the form of senior debt, unitranche, second lien, subordinated debt and, to a lesser extent, senior debt and minority equity investments. Its investment focus is to make loans to, and selected equity investments in, privately-held lower-middle-market companies.

Legg Mason Company Profile

Legg Mason, Inc. is a publicly owned asset management holding company. Through its subsidiaries, the firm provides investment management and related services to company-sponsored mutual funds and other investment vehicles including pension funds, foundations, endowments, sovereign wealth funds, insurance companies, private banks, family offices, individuals, as well as to global, institutional, and retail clients. It launches and manages equity, fixed income, and multi-asset customized portfolios through its subsidiaries. The firm also launches and manages mutual funds and exchange traded funds for its clients through its subsidiaries. It invests in private and public equity, fixed income, and multi asset markets across the globe through its subsidiaries. Through its subsidiaries, the firm also invests in alternative markets. It also employs a combination of fundamental and quantitative research to make its investments through its subsidiaries. Legg Mason, Inc. was founded in 1899 and is based in Baltimore, Maryland.

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