Rand Capital (NASDAQ:RAND) and TPG Specialty Lending (NYSE:TSLX) are both small-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their analyst recommendations, profitability, risk, institutional ownership, dividends, valuation and earnings.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Rand Capital and TPG Specialty Lending, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Rand Capital 0 0 0 0 N/A
TPG Specialty Lending 0 1 5 0 2.83

TPG Specialty Lending has a consensus target price of $21.33, suggesting a potential upside of 7.53%. Given TPG Specialty Lending’s higher probable upside, analysts clearly believe TPG Specialty Lending is more favorable than Rand Capital.

Institutional & Insider Ownership

16.8% of Rand Capital shares are held by institutional investors. Comparatively, 57.6% of TPG Specialty Lending shares are held by institutional investors. 9.7% of Rand Capital shares are held by insiders. Comparatively, 4.4% of TPG Specialty Lending shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Earnings & Valuation

This table compares Rand Capital and TPG Specialty Lending’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Rand Capital $2.11 million 7.98 -$390,000.00 N/A N/A
TPG Specialty Lending $261.91 million 5.00 $143.88 million $2.25 8.82

TPG Specialty Lending has higher revenue and earnings than Rand Capital.

Profitability

This table compares Rand Capital and TPG Specialty Lending’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Rand Capital 23.63% 0.41% 0.32%
TPG Specialty Lending 48.29% 13.05% 7.37%

Dividends

TPG Specialty Lending pays an annual dividend of $1.56 per share and has a dividend yield of 7.9%. Rand Capital does not pay a dividend. TPG Specialty Lending pays out 69.3% of its earnings in the form of a dividend.

Summary

TPG Specialty Lending beats Rand Capital on 9 of the 13 factors compared between the two stocks.

About Rand Capital

Rand Capital Corporation is a business development company specializing in venture capital and private equity investments. The firm prefers to make investments through equity or debt instruments in early venture, expansion stage, and in small to medium-sized privately held companies. It generally lends to more mature companies. The firm does not prefer to invest in real estate sector. It invests in companies that are engaged in the exploitation of new or unique products, technologies, or services. The firm invests in healthcare, consumer products, manufacturing, software, and professional services. It seeks to invest in companies based in the Western and Upstate New York region and its surrounding states with focus on Buffalo and Niagara region. The firm may invest in region within three to five hour drives from Western New York including Canada. It typically invests between $0.5 million and $1.5 million and the total investment in rounds is between $1 million and $5 million. The firm seeks to invest up to maximum of $3 million total per company as part of follow-on investments. It invest in startups and companies having annual revenue up to $10 million. The firm seeks to be a lead investor in companies within its geographical area and participates in syndicate/co-invest with other investors outside it. It prefers to invest in businesses that are unique or possess proprietary right. The firm prefers to be a minority investor and seeks to take a Board seat in its portfolio companies. It typically holds its investments for a period of five to seven years. Rand Capital Corporation was founded in 1969 and is based in Buffalo, New York.

About TPG Specialty Lending

TPG Specialty Lending, Inc. is a business development company. The fund provides senior secured loans (first-lien, second-lien, and unitranche), mezzanine debt, non-control structured equity, and common equity with a focus on co-investments for organic growth, acquisitions, market or product expansion, restructuring initiatives, recapitalizations, and refinancing. The fund invests in business services, software & technology, healthcare, energy, consumer & retail, manufacturing, industrials, royalty related businesses, education, and specialty finance. It seeks to finance middle market companies principally located in the United States. The fund invests in companies with enterprise value between $50 million and $1 billion or more and EBITDA between $10 million and $250 million. The transaction size is between $15 million and $350 million. The fund invests across the spectrum of the capital structure and can arrange syndicated transactions of up to $500 million and hold sizeable positions within its credits.

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