Reviewing Virtus Investment Partners (NASDAQ:VRTS) and Saratoga Investment (NASDAQ:SAR)

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Virtus Investment Partners (NASDAQ:VRTS) and Saratoga Investment (NYSE:SAR) 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, risk, profitability, earnings, analyst recommendations, institutional ownership and valuation.

Analyst Ratings

This is a summary of current ratings and price targets for Virtus Investment Partners and Saratoga Investment, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Virtus Investment Partners 0 3 2 0 2.40
Saratoga Investment 0 3 1 0 2.25

Virtus Investment Partners presently has a consensus target price of $105.60, suggesting a potential upside of 11.57%. Saratoga Investment has a consensus target price of $25.00, suggesting a potential upside of 2.67%. Given Virtus Investment Partners’ stronger consensus rating and higher possible upside, equities research analysts clearly believe Virtus Investment Partners is more favorable than Saratoga Investment.

Profitability

This table compares Virtus Investment Partners and Saratoga Investment’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Virtus Investment Partners 13.86% 21.42% 4.03%
Saratoga Investment 44.66% 10.75% 4.17%

Dividends

Virtus Investment Partners pays an annual dividend of $2.20 per share and has a dividend yield of 2.3%. Saratoga Investment pays an annual dividend of $2.20 per share and has a dividend yield of 9.0%. Virtus Investment Partners pays out 17.9% of its earnings in the form of a dividend. Saratoga Investment pays out 83.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Saratoga Investment has raised its dividend for 3 consecutive years. Saratoga Investment is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

Virtus Investment Partners has a beta of 1.64, indicating that its share price is 64% more volatile than the S&P 500. Comparatively, Saratoga Investment has a beta of 0.64, indicating that its share price is 36% less volatile than the S&P 500.

Earnings and Valuation

This table compares Virtus Investment Partners and Saratoga Investment’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Virtus Investment Partners $552.23 million 1.20 $75.53 million $12.26 7.72
Saratoga Investment $47.71 million 4.09 $18.51 million $2.63 9.26

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

Insider and Institutional Ownership

94.2% of Virtus Investment Partners shares are held by institutional investors. Comparatively, 15.8% of Saratoga Investment shares are held by institutional investors. 5.6% of Virtus Investment Partners shares are held by company insiders. Comparatively, 20.9% of Saratoga Investment shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Summary

Virtus Investment Partners beats Saratoga Investment on 10 of the 17 factors compared between the two stocks.

About Virtus Investment Partners

Virtus Investment Partners, Inc. is a publicly owned investment manager. The firm primarily provides its services to individual and institutional clients. It launches separate client focused equity and fixed income portfolios. The firm launches equity, fixed income, and balanced mutual funds for its clients. It invests in the public equity, fixed income, and real estate markets. The firm also invests in exchange traded funds. It employs a multi manager approach for its products. The firm employs quantitative analysis to make its investments. It benchmarks the performance of its portfolios against the S&P 500 Index. The firm conducts in-house research to make its investments. Virtus Investment Partners, Inc. was founded in 1988 and is based in Hartford, Connecticut.

About Saratoga Investment

Saratoga Investment Corp. is a business development company specializing in leveraged and management buyouts, acquisition financings, growth financings, recapitalization, debt refinancing, and transitional financing transactions at the lower end of middle market companies. It structures its investments as debt and equity by investing through first and second lien loans, mezzanine debt, co-investments, select high yield bonds, senior secured bonds, unsecured bonds, and preferred and common equity. It seeks to invest in the United States. The firm primarily invests $5 million to $20 million in companies having EBITDA of $2 million or greater and revenues of $8 million to $150 million. It invests through direct lending as well as participation in loan syndicates. The firm was formerly known as GSC Investment Corp. Saratoga Investment Corp. is based in New York, New York with an additional office in Florham Park, New Jersey.

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