Saratoga Investment (NYSE: SAR) and Cannae (NYSE:CNNE) are both small-cap financials companies, but which is the superior business? We will contrast the two businesses based on the strength of their valuation, profitability, analyst recommendations, institutional ownership, earnings, dividends and risk.

Institutional and Insider Ownership

16.7% of Saratoga Investment shares are owned by institutional investors. Comparatively, 70.9% of Cannae shares are owned by institutional investors. 32.0% of Saratoga Investment shares are owned by insiders. Comparatively, 6.0% of Cannae shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Volatility & Risk

Saratoga Investment has a beta of 0.26, indicating that its stock price is 74% less volatile than the S&P 500. Comparatively, Cannae has a beta of 0.76, indicating that its stock price is 24% less volatile than the S&P 500.

Dividends

Saratoga Investment pays an annual dividend of $1.96 per share and has a dividend yield of 9.8%. Cannae does not pay a dividend. Saratoga Investment pays out 87.1% 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 2 consecutive years.

Profitability

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

Net Margins Return on Equity Return on Assets
Saratoga Investment 36.37% 8.76% 3.33%
Cannae 7.05% 1.76% 0.86%

Analyst Recommendations

This is a breakdown of current recommendations for Saratoga Investment and Cannae, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Saratoga Investment 0 2 3 0 2.60
Cannae 0 0 0 0 N/A

Saratoga Investment presently has a consensus price target of $24.00, suggesting a potential upside of 20.00%. Given Saratoga Investment’s higher probable upside, equities research analysts plainly believe Saratoga Investment is more favorable than Cannae.

Earnings & Valuation

This table compares Saratoga Investment and Cannae’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Saratoga Investment $33.16 million 3.78 $11.38 million $2.25 8.89
Cannae $1.34 billion 0.88 $650.00 million $1.62 10.30

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

Summary

Saratoga Investment beats Cannae on 10 of the 16 factors compared between the two stocks.

About Saratoga Investment

Saratoga Investment Corp. is a specialty finance company. The Company is an externally managed, closed-end, non-diversified management investment company. The Company invests primarily in leveraged loans and mezzanine debt issued by private middle-market companies in the United States. Its investment objective is to generate current income and, to a lesser extent, capital appreciation from its investments. It purchases mezzanine debt and makes equity investments in middle market companies. It may invest in other investments, such as investments in distressed debt, including securities of companies in bankruptcy, foreign debt, private equity, securities of public companies that are not thinly traded and structured finance vehicles, such as collateralized loan obligation funds. Its leveraged loan portfolio consists primarily of first lien and second lien term loans. The Company’s investment activities are externally managed and advised by Saratoga Investment Advisors, LLC.

About Cannae

Cannae Holdings, Inc. is a diversified holding company. The Company has investments in a variety of industries including Restaurants, Technology Enabled Healthcare Services, Financial Services and more. The Company holds majority and minority equity investment stakes in a number of entities, including Ceridian Holdings, LLC, American Blue Ribbon Holdings, and LLC and T-System Holding LLC.

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