Critical Review: Portman Ridge Finance (NASDAQ:BCIC) versus StepStone Group (NASDAQ:STEP)

StepStone Group (NASDAQ:STEP) and Portman Ridge Finance (NASDAQ:BCIC) are both finance companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, risk, earnings, dividends, analyst recommendations, institutional ownership and profitability.

Analyst Ratings

This is a summary of recent ratings and price targets for StepStone Group and Portman Ridge Finance, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
StepStone Group	1	2	7	0	2.60
Portman Ridge Finance	1	4	0	0	1.80

StepStone Group presently has a consensus price target of $69.00, suggesting a potential upside of 55.55%. Portman Ridge Finance has a consensus price target of $9.25, suggesting a potential upside of 33.29%. Given StepStone Group’s stronger consensus rating and higher probable upside, research analysts plainly believe StepStone Group is more favorable than Portman Ridge Finance.

Volatility & Risk

StepStone Group has a beta of 1.29, suggesting that its stock price is 29% more volatile than the S&P 500. Comparatively, Portman Ridge Finance has a beta of 0.5, suggesting that its stock price is 50% less volatile than the S&P 500.

Dividends

StepStone Group pays an annual dividend of $1.32 per share and has a dividend yield of 3.0%. Portman Ridge Finance pays an annual dividend of $1.08 per share and has a dividend yield of 15.6%. StepStone Group pays out -17.1% of its earnings in the form of a dividend. Portman Ridge Finance pays out -196.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. StepStone Group has raised its dividend for 3 consecutive years. Portman Ridge Finance is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider & Institutional Ownership

55.5% of StepStone Group shares are owned by institutional investors. Comparatively, 30.1% of Portman Ridge Finance shares are owned by institutional investors. 15.7% of StepStone Group shares are owned by company insiders. Comparatively, 1.3% of Portman Ridge Finance shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares StepStone Group and Portman Ridge Finance”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
StepStone Group	$2.01 billion	2.64	-$535.81 million	($7.72)	-5.75
Portman Ridge Finance	$2.90 million	29.63	$11.49 million	($0.55)	-12.62

Portman Ridge Finance has lower revenue, but higher earnings than StepStone Group. Portman Ridge Finance is trading at a lower price-to-earnings ratio than StepStone Group, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares StepStone Group and Portman Ridge Finance’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
StepStone Group	-30.53%	43.38%	4.40%
Portman Ridge Finance	-5.72%	14.09%	5.44%

Summary

StepStone Group beats Portman Ridge Finance on 10 of the 17 factors compared between the two stocks.

About StepStone Group

StepStone Group Inc. is a private equity and venture capital firm specializing in direct, fund of funds, secondary direct, and secondary indirect investments. For direct investment, it seeks to invest in private debt, venture debt, incubation, mezzanine, distressed/vulture, seed/startup, early venture, mid venture, late venture, emerging growth, later stage, turnaround, growth capital, industry consolidation, recapitalization, buyout investments in mature and middle market companies. It prefers to invest in natural resources, technology, healthcare, services, materials, manufacturing, consumer durables, apparel, hotels, restaurants and leisure, media, retailing, power, utilities consumer staples, financials, telecommunication services, clean energy/renewables, transport, social, natural capital, infrastructure, corporate, real estate, credit and real asset. The firm invests globally with a focus on United States, North America, Europe, Asia, Latin America, Middle East, Africa, Brazil, Mexico, Argentina, Colombia, New Zealand, China, India, Korea, Japan, Taiwan, and Australia region. The firm invests between 5% and 40% in emerging markets. For fund of fund investment, it seeks to invest in private equity funds, venture capital funds, Special situation funds, Real estate funds, Infrastructure funds, mezzanine funds, and turnaround/distressed funds. It considers investments in both domestic and international funds. It also seeks to make co-investments and follow-on investments and considers partial interests in funds. StepStone Group Inc. was founded in 2007 and is based in New York, New York with additional offices across North America, South America, Europe, Australia and Asia.

About Portman Ridge Finance

Portman Ridge Finance Corporation is a business development company specializing in investments in unitranche loans (including last out), first lien loans, second lien loans, subordinated debt, equity co-investment, buyout in middle market companies. It also makes acquisitions in businesses complementary to the firm’s business. It primarily invests in healthcare, cargo transport, manufacturing, industrial & environmental services, logistics & distribution, media & telecommunications, real estate, education, automotive, agriculture, aerospace/defense, packaging, electronics, finance, non-durable consumer, consumer products, business services, utilities, insurance, and food and beverage sectors. The fund typically invests $1 million to $20 million in its portfolio companies. It provides senior secured term loans from $2 million to $20 million maturing in five to seven years; second lien term loans from $5 million to $15 million maturing in six to eight years; senior unsecured loans $5 million to $23 million maturing in six to eight years; mezzanine loans from $5 million to $15 million maturing in seven to ten years; and equity investments from $1 to $5 million. The fund targets the companies with EBITDA between $5 million and $25 million. While investing in debt securities, it invests in those middle market firms with EBITDA between $10 million and $50 million and/or total debt between $25 million and $150 million. It invests in minority, and majority or control equity positions alongside its private equity sponsor partners.