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

Dividends

Capital Southwest pays an annual dividend of $1.44 per share and has a dividend yield of 7.2%. Stans Energy does not pay a dividend. Capital Southwest pays out 142.6% 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 raised its dividend for 2 consecutive years.

Institutional and Insider Ownership

52.4% of Capital Southwest shares are held by institutional investors. Comparatively, 0.0% of Stans Energy shares are held by institutional investors. 6.7% of Capital Southwest shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Risk and Volatility

Capital Southwest has a beta of 0.17, indicating that its stock price is 83% less volatile than the S&P 500. Comparatively, Stans Energy has a beta of 3.04, indicating that its stock price is 204% more volatile than the S&P 500.

Profitability

This table compares Capital Southwest and Stans Energy’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Capital Southwest 102.03% 6.23% 4.26%
Stans Energy N/A N/A N/A

Valuation and Earnings

This table compares Capital Southwest and Stans Energy’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Capital Southwest $35.13 million 9.74 $39.30 million $1.01 19.88
Stans Energy N/A N/A N/A N/A N/A

Capital Southwest has higher revenue and earnings than Stans Energy.

Analyst Ratings

This is a summary of current recommendations for Capital Southwest and Stans Energy, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Capital Southwest 0 0 2 0 3.00
Stans Energy 0 0 0 0 N/A

Capital Southwest currently has a consensus target price of $22.00, suggesting a potential upside of 9.56%. Given Capital Southwest’s higher possible upside, equities analysts plainly believe Capital Southwest is more favorable than Stans Energy.

Summary

Capital Southwest beats Stans Energy on 10 of the 12 factors compared between the two stocks.

Capital Southwest Company Profile

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.

Stans Energy Company Profile

Stans Energy Corp. operates as a resource development company with a focus on rare earth and specialty metal properties in Canada, the Kyrgyz Republic, and Russia. It primarily explores for uranium, rare earth elements, gold, and base metals. Stans Energy Corp. was incorporated in 2005 and is headquartered in Toronto, Canada.

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