Head-To-Head Review: Capital Southwest (NASDAQ:CSWC) and Allied Minds (NASDAQ:ALLWF)

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Capital Southwest (NASDAQ:CSWC) and Allied Minds (OTCMKTS:ALLWF) are both small-cap finance companies, but which is the superior investment? We will compare the two companies based on the strength of their dividends, profitability, analyst recommendations, institutional ownership, earnings, risk and valuation.

Profitability

This table compares Capital Southwest and Allied Minds’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Capital Southwest 68.26% 7.53% 4.64%
Allied Minds N/A N/A N/A

Volatility and Risk

Capital Southwest has a beta of 0.25, suggesting that its stock price is 75% less volatile than the S&P 500. Comparatively, Allied Minds has a beta of 0.19, suggesting that its stock price is 81% less volatile than the S&P 500.

Earnings & Valuation

This table compares Capital Southwest and Allied Minds’ top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Capital Southwest $51.88 million 7.21 $33.06 million $1.42 15.30
Allied Minds N/A N/A N/A N/A N/A

Capital Southwest has higher revenue and earnings than Allied Minds.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Capital Southwest and Allied Minds, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Capital Southwest 0 1 2 0 2.67
Allied Minds 0 0 1 0 3.00

Capital Southwest currently has a consensus target price of $23.33, suggesting a potential upside of 7.43%. Given Capital Southwest’s higher possible upside, analysts clearly believe Capital Southwest is more favorable than Allied Minds.

Insider & Institutional Ownership

53.3% of Capital Southwest shares are owned by institutional investors. 6.7% of Capital Southwest shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Dividends

Capital Southwest pays an annual dividend of $1.56 per share and has a dividend yield of 7.2%. Allied Minds does not pay a dividend. Capital Southwest pays out 109.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Capital Southwest has increased its dividend for 3 consecutive years.

Summary

Capital Southwest beats Allied Minds on 11 of the 13 factors compared between the two stocks.

About Capital Southwest

Capital Southwest Corporation is a business development company specializing in credit and private equity and venture capital investments in middle market companies, mezzanine, later stage, mature, late venture, emerging growth, buyouts, recapitalizations and growth capital investments. It does not invest in startups, publicly traded companies, real estate developments, project finance opportunities, oil and gas exploration businesses, troubled companies, turnarounds, and companies in which significant senior management is departing. In lower middle market, the firm typically invests in growth financing, bolt-on acquisitions, new platform acquisitions, refinancing, dividend recapitalizations, sponsor-led buyouts, and management buyouts situations. The investment structures are Unitranche debt, subordinated debt, senior debt, first and second lien debt, and preferred and common equity. The firm makes equity co-investments alongside debt investments, up to 20% of total check and only makes non-control investments. It prefers to invest in Industrial manufacturing and services, value-added distribution, healthcare products and services, business services, specialty chemicals, food and beverage, tech-enabled services and SaaS models. The firm seeks to invest in energy services and products, industrial technologies, and specialty chemicals and products. Within energy services and products, the firm seeks to invest in each segment of the industry, including upstream, midstream and downstream, excluding exploration and production with a focus on differentiated products and services, equipment and tool rental, consumable products, and drilling and completion chemicals. Within industrial technologies, it seeks to invest in automation and process controls, handling and packaging equipment, industrial filtration and fluid handling, measurement, monitoring and testing, professional tools, and sensors and instrumentation. Within and specialty chemicals and products, the firm seeks to invest in businesses that develop and manufacture highly differentiated chemicals and products including adhesives, coatings and sealants, catalysts and absorbents, cosmeceuticals, fine chemicals, flavors and fragrances, performance lubricants, polymers, plastics and composites, chemical dispensing and filtration equipment, professional and industrial trade consumables and tools, engineered solutions for HVAC, plumbing, and electrical installations, specified high performance materials for fire protection and oilfield applications. It may also invest in exceptional opportunities in building products. The firm seeks to invest in the United States. The firm seeks to make investments ranging from $5 to $25 million in securities. It seeks to make equity investments up to $5 million and debt investments between $5 million and $20 million and co-invest in transaction size upto $40 million. It prefers to invest in companies with revenues approaching above $10 million, profitable operations, historical growth rate of at least 15 percent per year. . Within the lower middle market, it seeks to invest in with less than $15 million in EBITDA and also opportunistically invests in the upper middle market, generally defined as companies with EBITDA in excess of $50 million. In addition to making direct investments, the firm allocates capital to syndicated first and second lien term loans in the upper middle market. Criteria for Upper Middle Market Syndicated 1st Lien is EBITDA Size more than $30 million, Closing Leverage greater than 4 times, investment hold size between $5 million and $7 million, investment yield greater than 6.5%. Criteria for Upper Middle Market Syndicated 2nd Lien is EBITDA Size more than $50 million, Closing Leverage greater than 6 times, investment hold size between $5 million and $7 million, investment yield greater than 9%. It prefers to take a majority and minority stake. The firm has the flexibility to hold investments for very long period in its portfolio companies. It may also invest through warrants. The firm prefers to take Board participation in its portfolio companies. Capital Southwest Corporation was founded on April 19, 1961 and is based in Dallas, Texas.

About Allied Minds

Allied Minds plc is a private equity and venture capital firm specializing in pre-seed, seed, start-up, and early stage technology investments. The firm prefers to invest across all products, services, and industries with a focus on the life science and technology sector including medical devices, diagnostics, biopharmaceuticals, big data, cyber security, communications, semiconductors, and food safety. It primarily invests in companies based in the United States, but depending on opportunities this could be expanded to a global network of partners and investments. The firm typically invests between $0.25 million and $1 million in seed investments and from $5 million to $10 million in Series A investments. The firm focuses on commercializing technologies from leading United States Universities and national labs. It seeks to take majority equity positions in its portfolio companies. The firm partners with universities to fund licensing deals and corporate spin-outs. It prefers to continue to invest alongside a syndicate for larger Series A and follow-on rounds. Allied Minds plc is based in Boston, Massachusetts with additional offices in London, United Kingdom; Los Angeles, California; Seattle, Washington; New York; New York and Washington, DC.

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