Stellus Capital Inv (NYSE: SCM) and Safeguard Scientifics (NYSE:SFE) are both small-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their analyst recommendations, risk, institutional ownership, dividends, profitability, earnings and valuation.
Volatility and Risk
Stellus Capital Inv has a beta of 0.52, meaning that its stock price is 48% less volatile than the S&P 500. Comparatively, Safeguard Scientifics has a beta of 1.26, meaning that its stock price is 26% more volatile than the S&P 500.
This is a summary of recent ratings and target prices for Stellus Capital Inv and Safeguard Scientifics, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Stellus Capital Inv||0||1||2||0||2.67|
Stellus Capital Inv presently has a consensus price target of $14.17, indicating a potential upside of 17.08%. Safeguard Scientifics has a consensus price target of $17.25, indicating a potential upside of 39.11%. Given Safeguard Scientifics’ higher probable upside, analysts clearly believe Safeguard Scientifics is more favorable than Stellus Capital Inv.
Institutional and Insider Ownership
29.1% of Stellus Capital Inv shares are owned by institutional investors. Comparatively, 76.0% of Safeguard Scientifics shares are owned by institutional investors. 4.2% of Stellus Capital Inv shares are owned by insiders. Comparatively, 2.1% of Safeguard Scientifics shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.
Stellus Capital Inv pays an annual dividend of $1.36 per share and has a dividend yield of 11.2%. Safeguard Scientifics does not pay a dividend. Stellus Capital Inv pays out 112.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.
Earnings & Valuation
This table compares Stellus Capital Inv and Safeguard Scientifics’ top-line revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Stellus Capital Inv||$39.65 million||4.87||$22.61 million||$1.21||10.00|
|Safeguard Scientifics||N/A||N/A||-$88.57 million||($4.34)||-2.86|
Stellus Capital Inv has higher revenue and earnings than Safeguard Scientifics. Safeguard Scientifics is trading at a lower price-to-earnings ratio than Stellus Capital Inv, indicating that it is currently the more affordable of the two stocks.
This table compares Stellus Capital Inv and Safeguard Scientifics’ net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Stellus Capital Inv||57.04%||8.67%||4.83%|
Stellus Capital Inv beats Safeguard Scientifics on 10 of the 14 factors compared between the two stocks.
About Stellus Capital Inv
Stellus Capital Investment Corporation is a business development company specializing in investments in private middle-market companies. It invests through first lien, second lien, unitranche, and mezzanine debt financing, often with a corresponding equity investment. The fund seeks to invest in companies with an EBITDA between $5 million and $50 million.
About Safeguard Scientifics
Safeguard Scientifics, Inc. no longer investing. It is a private equity and venture capital firm specializing in expansion financings, growth capital, management buyouts, recapitalizations, industry consolidations, corporate spinouts, growth stage, and early stage financings in Fintech sector. It initially invests in a Series A-C round and opportunistically in a seed round. The firm prefers to make investments in companies engaged in the technology, financial services, and healthcare sector. Within the technology sector, it invests in software as a service, adtech / digital media, Internet of Everything, enhanced security, predictive analytics, machine learning, artificial intelligence, enterprise software, technology enabled services, internet/new media, financial technology, cloud, mobile, social, big data, in memory, and selected business services with capital requirements of up to $25 million. Within healthcare sector, the firm invests in molecular and point-of-care diagnostics, medical devices, regenerative medicine, medical technology, digital health, healthcare technology, specialty pharmaceuticals, and selected healthcare services. It invests throughout the United States with a focus on Mid-Atlantic region, and Southeastern Canada. The firm primarily invests between $5 million and $25 million in growth equity financing and between $5 million and $10 million in early-stage financing. It typically invests in the capital structures including owner financed and bootstrapped companies, corporate division or business unit, and venture capital-backed seeking a growth partner. The firm prefers to be the largest shareholder in its portfolio companies, with ownership in the range of 20 percent to 50 percent. However, it may occasionally take a majority or smaller stake in its portfolio companies. It prefers to invest in companies having proprietary technology and intellectual property. The firm prefers to take a Board seat in its portfolio companies. The company was founded in 1953 as Lancaster Corporation and changed its name to Safeguard Scientifics, Inc. in 1981. Safeguard Scientifics, Inc. is based in Radnor, Pennsylvania with an additional office in Weston, Massachusetts.
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