Financial Review: Bain Capital Specialty Finance (NYSE:BCSF) vs. WhiteHorse Finance (NASDAQ:WHF)

Bain Capital Specialty Finance (NYSE:BCSF) and WhiteHorse Finance (NASDAQ:WHF) are both small-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their analyst recommendations, valuation, profitability, dividends, institutional ownership, risk and earnings.

Analyst Ratings

This is a summary of current recommendations and price targets for Bain Capital Specialty Finance and WhiteHorse Finance, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Bain Capital Specialty Finance	0	2	1	0	2.33
WhiteHorse Finance	2	3	0	0	1.60

Bain Capital Specialty Finance presently has a consensus target price of $15.00, suggesting a potential upside of 9.81%. WhiteHorse Finance has a consensus target price of $7.75, suggesting a potential upside of 11.99%. Given WhiteHorse Finance’s higher probable upside, analysts clearly believe WhiteHorse Finance is more favorable than Bain Capital Specialty Finance.

Earnings and Valuation

This table compares Bain Capital Specialty Finance and WhiteHorse Finance”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Bain Capital Specialty Finance	$292.65 million	3.03	$119.42 million	$1.44	9.49
WhiteHorse Finance	$92.82 million	1.73	$10.85 million	$0.43	16.09

Bain Capital Specialty Finance has higher revenue and earnings than WhiteHorse Finance. Bain Capital Specialty Finance is trading at a lower price-to-earnings ratio than WhiteHorse Finance, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Bain Capital Specialty Finance and WhiteHorse Finance’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Bain Capital Specialty Finance	33.45%	11.03%	4.66%
WhiteHorse Finance	12.91%	9.93%	4.14%

Volatility & Risk

Bain Capital Specialty Finance has a beta of 0.6, suggesting that its share price is 40% less volatile than the S&P 500. Comparatively, WhiteHorse Finance has a beta of 0.56, suggesting that its share price is 44% less volatile than the S&P 500.

Dividends

Bain Capital Specialty Finance pays an annual dividend of $1.68 per share and has a dividend yield of 12.3%. WhiteHorse Finance pays an annual dividend of $1.00 per share and has a dividend yield of 14.5%. Bain Capital Specialty Finance pays out 116.7% 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 232.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Bain Capital Specialty Finance has raised its dividend for 4 consecutive years and WhiteHorse Finance has raised its dividend for 3 consecutive years.

Institutional and Insider Ownership

13.2% of WhiteHorse Finance shares are held by institutional investors. 0.6% of Bain Capital Specialty Finance shares are held by company insiders. Comparatively, 2.5% of WhiteHorse Finance shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Summary

Bain Capital Specialty Finance beats WhiteHorse Finance on 12 of the 17 factors compared between the two stocks.

About Bain Capital Specialty Finance

Bain Capital Specialty Finance, Inc. is business development company specializing in direct loans to middle-market companies. The fund seeks to invest in senior investments with a first or second lien on collateral, senior first lien, stretch senior, senior second lien, unitranche, mezzanine debt, junior securities, other junior investments, and secondary purchases of assets or portfolios that primarily consist of middle-market corporate debt. It typically invests in companies with EBITDA between $10 million and $150 million.

About WhiteHorse Finance

WhiteHorse Finance, Inc. is business development company, non-diversified, closed end management company specializing in originating senior secured loans, lower middle market, growth capital industries. It invests in broadline retail, office services and supplies, building products, health care services, health care supplies, research and consulting services, application software, home furnishings, specialized consumer services, data processing and outsourced services, leisure facilities, cable, and satellite. It prefers to invest in United States. It typically invests between $5 million to $25 million in companies having enterprise value of between $50 million and $350 million.