Financial Analysis: Sound Point Meridian Capital (NYSE:SPMC) versus OFS Credit (NASDAQ:OCCI)

OFS Credit (NASDAQ:OCCI) and Sound Point Meridian Capital (NYSE:SPMC) are both small-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their dividends, risk, analyst recommendations, valuation, institutional ownership, profitability and earnings.

Risk & Volatility

OFS Credit has a beta of 0.68, indicating that its stock price is 32% less volatile than the S&P 500. Comparatively, Sound Point Meridian Capital has a beta of 1.15, indicating that its stock price is 15% more volatile than the S&P 500.

Profitability

This table compares OFS Credit and Sound Point Meridian Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
OFS Credit	N/A	N/A	N/A
Sound Point Meridian Capital	N/A	N/A	N/A

Dividends

OFS Credit pays an annual dividend of $1.18 per share and has a dividend yield of 36.1%. Sound Point Meridian Capital pays an annual dividend of $2.40 per share and has a dividend yield of 20.6%. OFS Credit pays out -90.1% of its earnings in the form of a dividend. Sound Point Meridian Capital pays out -39.1% 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. OFS Credit is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a breakdown of recent ratings for OFS Credit and Sound Point Meridian Capital, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
OFS Credit	0	0	0	0	0.00
Sound Point Meridian Capital	1	2	1	0	2.00

Sound Point Meridian Capital has a consensus price target of $16.10, suggesting a potential upside of 38.22%. Given Sound Point Meridian Capital’s stronger consensus rating and higher probable upside, analysts clearly believe Sound Point Meridian Capital is more favorable than OFS Credit.

Institutional and Insider Ownership

23.8% of OFS Credit shares are held by institutional investors. 1.0% of OFS Credit shares are held by insiders. Comparatively, 0.9% of Sound Point Meridian Capital shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Earnings & Valuation

This table compares OFS Credit and Sound Point Meridian Capital”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
OFS Credit	$44.15 million	2.15	-$38.11 million	($1.31)	-2.50
Sound Point Meridian Capital	$72.51 million	3.29	-$125.87 million	($6.14)	-1.90

OFS Credit has higher earnings, but lower revenue than Sound Point Meridian Capital. OFS Credit is trading at a lower price-to-earnings ratio than Sound Point Meridian Capital, indicating that it is currently the more affordable of the two stocks.

Summary

Sound Point Meridian Capital beats OFS Credit on 7 of the 13 factors compared between the two stocks.

About OFS Credit

OFS Credit Company, Inc. is a fund of OFS Advisor.

About Sound Point Meridian Capital

Sound Point Meridian Capital Inc. is an externally managed, non-diversified closed-end management investment company. Its investment objective is to generate high current income, with a secondary objective to generate capital appreciation, by investing primarily in third-party collateralized loan obligation equity and mezzanine tranches. Sound Point Meridian Capital Inc. is based in NEW YORK.