Capitala Finance Corp. (NASDAQ: CPTA) and WhiteHorse Finance (NASDAQ:WHF) are both finance companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, institutional ownership, risk, analyst recommendations, valuation, dividends and profitabiliy.

Insider and Institutional Ownership

28.6% of Capitala Finance Corp. shares are owned by institutional investors. Comparatively, 11.6% of WhiteHorse Finance shares are owned by institutional investors. 8.4% of Capitala Finance Corp. shares are owned by company insiders. Comparatively, 1.4% of WhiteHorse Finance shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Analyst Ratings

This is a summary of current ratings and price targets for Capitala Finance Corp. and WhiteHorse Finance, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Capitala Finance Corp. 0 5 4 0 2.44
WhiteHorse Finance 0 0 3 0 3.00

Capitala Finance Corp. presently has a consensus target price of $15.44, suggesting a potential upside of 58.01%. WhiteHorse Finance has a consensus target price of $13.50, suggesting a potential downside of 3.57%. Given Capitala Finance Corp.’s higher possible upside, equities research analysts clearly believe Capitala Finance Corp. is more favorable than WhiteHorse Finance.

Valuation and Earnings

This table compares Capitala Finance Corp. and WhiteHorse Finance’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Capitala Finance Corp. N/A N/A N/A $0.34 28.74
WhiteHorse Finance N/A N/A N/A $1.93 7.25

WhiteHorse Finance is trading at a lower price-to-earnings ratio than Capitala Finance Corp., indicating that it is currently the more affordable of the two stocks.

Volatility & Risk

Capitala Finance Corp. has a beta of 1.02, meaning that its stock price is 2% more volatile than the S&P 500. Comparatively, WhiteHorse Finance has a beta of 0.76, meaning that its stock price is 24% less volatile than the S&P 500.

Dividends

Capitala Finance Corp. pays an annual dividend of $1.56 per share and has a dividend yield of 16.0%. WhiteHorse Finance pays an annual dividend of $1.42 per share and has a dividend yield of 10.1%. Capitala Finance Corp. pays out 458.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. WhiteHorse Finance pays out 73.6% of its earnings in the form of a dividend.

Profitability

This table compares Capitala Finance Corp. and WhiteHorse Finance’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Capitala Finance Corp. 8.91% 8.45% 3.65%
WhiteHorse Finance 65.58% 10.78% 6.00%

About Capitala Finance Corp.

Capitala Finance Corp. is an externally managed non-diversified, closed-end management investment company. The Company’s investment objective is to generate both current income and capital appreciation through debt and equity investments. Both directly and through its subsidiaries that are licensed by the United States Small Business Administration (SBA), the Company offers financing to business owners, management teams and financial sponsors for change of ownership transactions, recapitalizations, strategic acquisitions, business expansion and other growth initiatives. The Company provides capital to lower and traditional middle-market companies in the United States, with a non-exclusive emphasis on the Southeast, Southwest and Mid-Atlantic regions. The Company invests in first lien, second lien and subordinated loans. The Company’s investment advisor is Capitala Investment Advisors, LLC.

About WhiteHorse Finance

WhiteHorse Finance, Inc. is a non-diversified, closed-end management investment company. The Company is a direct lender targeting debt investments in privately held, small-cap companies located in the United States. The Company’s investment objective is to generate attractive risk-adjusted returns primarily by originating and investing in senior secured loans, including first lien and second lien facilities, to performing small-cap companies across a range of industries that typically carry a floating interest rate based on the London Interbank Offered Rate (LIBOR) and have a term of 3 to 6 years. The Company may also make investments at other levels of a company’s capital structure, including mezzanine loans or equity interests. The Company also may receive warrants to purchase common stock in connection with its debt investments. Its investment advisor is H.I.G. WhiteHorse Advisers, LLC.

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