Comparing Capital Southwest (NASDAQ:CSWC) & Crescent Capital BDC (NASDAQ:CCAP)

Crescent Capital BDC (NASDAQ:CCAP) and Capital Southwest (NASDAQ:CSWC) are both small-cap finance companies, but which is the superior business? We will compare the two companies based on the strength of their dividends, analyst recommendations, institutional ownership, risk, profitability, earnings and valuation.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Crescent Capital BDC	-0.10%	8.66%	3.63%
Capital Southwest	43.06%	13.76%	6.29%

Valuation & Earnings

This table compares Crescent Capital BDC and Capital Southwest”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Crescent Capital BDC	$167.29 million	2.29	$34.51 million	($0.09)	-115.33
Capital Southwest	$232.10 million	6.76	$113.00 million	$1.70	13.89

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

Dividends

Crescent Capital BDC pays an annual dividend of $1.36 per share and has a dividend yield of 13.1%. Capital Southwest pays an annual dividend of $2.32 per share and has a dividend yield of 9.8%. Crescent Capital BDC pays out -1,511.1% of its earnings in the form of a dividend. Capital Southwest pays out 136.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Crescent Capital BDC has raised its dividend for 1 consecutive years and Capital Southwest has raised its dividend for 2 consecutive years. Crescent Capital BDC is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Crescent Capital BDC and Capital Southwest, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Crescent Capital BDC	0	6	1	0	2.14
Capital Southwest	0	2	4	0	2.67

Crescent Capital BDC presently has a consensus target price of $12.25, suggesting a potential upside of 18.02%. Capital Southwest has a consensus target price of $25.17, suggesting a potential upside of 6.59%. Given Crescent Capital BDC’s higher possible upside, equities research analysts clearly believe Crescent Capital BDC is more favorable than Capital Southwest.

Institutional and Insider Ownership

49.5% of Crescent Capital BDC shares are owned by institutional investors. Comparatively, 23.4% of Capital Southwest shares are owned by institutional investors. 1.2% of Crescent Capital BDC shares are owned by insiders. Comparatively, 2.7% of Capital Southwest shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Risk and Volatility

Crescent Capital BDC has a beta of 0.56, suggesting that its stock price is 44% less volatile than the S&P 500. Comparatively, Capital Southwest has a beta of 0.67, suggesting that its stock price is 33% less volatile than the S&P 500.

Summary

Capital Southwest beats Crescent Capital BDC on 13 of the 17 factors compared between the two stocks.

About Crescent Capital BDC

Crescent Capital BDC, Inc. is a business development company that provides financing to middle-market companies. The company seeks to generate current income and, to a lesser extent, capital appreciation by investing in privately negotiated debt and equity securities. Its investment portfolio is focused primarily on senior secured loans, including first-lien and second-lien loans, as well as other debt investments and selected equity interests. Crescent Capital BDC generally works with established companies across a range of industries, providing capital for acquisitions, recapitalizations, refinancing, growth initiatives and other corporate purposes.

About Capital Southwest

Capital Southwest Corporation is an internally managed business development company that provides debt and equity financing to middle-market businesses. Its investments are primarily in privately held U.S. companies across a range of industries. The company’s portfolio generally includes senior secured loans, other debt investments and equity interests. Its financing can support business growth, acquisitions, recapitalizations and other corporate needs. Founded in 1961, Capital Southwest has a history as an investment company and today focuses on providing capital to middle-market businesses.