Capitala Finance Corp. (NASDAQ: CPTA) and Liberty All-Star Equity Fund (NYSE:USA) are both small-cap finance companies, but which is the better business? We will contrast the two businesses based on the strength of their analyst recommendations, risk, valuation, profitability, earnings, institutional ownership and dividends.

Risk and Volatility

Capitala Finance Corp. has a beta of 1.07, indicating that its share price is 7% more volatile than the S&P 500. Comparatively, Liberty All-Star Equity Fund has a beta of 1.23, indicating that its share price is 23% more volatile than the S&P 500.

Earnings and Valuation

This table compares Capitala Finance Corp. and Liberty All-Star Equity Fund’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Capitala Finance Corp. $68.31 million 1.85 $9.15 million $0.11 72.01
Liberty All-Star Equity Fund N/A N/A N/A N/A N/A

Capitala Finance Corp. has higher revenue and earnings than Liberty All-Star Equity Fund.

Profitability

This table compares Capitala Finance Corp. and Liberty All-Star Equity Fund’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Capitala Finance Corp. 3.04% 7.34% 3.13%
Liberty All-Star Equity Fund N/A N/A N/A

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Capitala Finance Corp. and Liberty All-Star Equity Fund, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Capitala Finance Corp. 0 4 3 0 2.43
Liberty All-Star Equity Fund 0 0 0 0 N/A

Capitala Finance Corp. currently has a consensus price target of $14.92, suggesting a potential upside of 88.34%. Given Capitala Finance Corp.’s higher probable upside, equities research analysts plainly believe Capitala Finance Corp. is more favorable than Liberty All-Star Equity Fund.

Institutional & Insider Ownership

26.5% of Capitala Finance Corp. shares are owned by institutional investors. Comparatively, 28.1% of Liberty All-Star Equity Fund shares are owned by institutional investors. 8.4% of Capitala Finance Corp. shares are owned by insiders. Comparatively, 0.1% of Liberty All-Star Equity Fund shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Dividends

Capitala Finance Corp. pays an annual dividend of $1.00 per share and has a dividend yield of 12.6%. Liberty All-Star Equity Fund pays an annual dividend of $0.13 per share and has a dividend yield of 2.1%. Capitala Finance Corp. pays out 909.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Summary

Capitala Finance Corp. beats Liberty All-Star Equity Fund on 8 of the 11 factors compared between the two stocks.

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 Liberty All-Star Equity Fund

Liberty All-Star Equity Fund is a diversified, closed-end management investment fund. The Fund seeks total investment return comprising long-term capital appreciation and current income through investing primarily in a diversified portfolio of equity securities. It allocates its portfolio assets on an approximately equal basis among several independent investment management organizations having various investment styles recommended and monitored by its investment advisor. It invests at least 80% of its net assets in a diversified portfolio of equity securities. The Fund invests in various sectors, including financials, information technology, healthcare, consumer discretionary, consumer staples, industrials, energy, materials, real estate, utilities and telecommunication services. Its investment managers invest primarily for pension funds, endowments, foundations and other institutions. The Fund’s investment advisor is ALPS Advisors, Inc.

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