Contrasting Sound Point Meridian Capital (NYSE:SPMC) & Hennessy Advisors (NASDAQ:HNNA)

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

Dividends

Hennessy Advisors pays an annual dividend of $0.60 per share and has a dividend yield of 5.9%. Sound Point Meridian Capital pays an annual dividend of $2.40 per share and has a dividend yield of 23.6%. Hennessy Advisors pays out 57.1% 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. Sound Point Meridian Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Hennessy Advisors	25.40%	8.53%	5.25%
Sound Point Meridian Capital	N/A	N/A	N/A

Institutional & Insider Ownership

10.3% of Hennessy Advisors shares are held by institutional investors. 36.0% of Hennessy Advisors shares are held by company insiders. Comparatively, 0.9% of Sound Point Meridian Capital shares are held 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.

Volatility & Risk

Hennessy Advisors has a beta of 0.59, meaning that its share price is 41% less volatile than the S&P 500. Comparatively, Sound Point Meridian Capital has a beta of 1.15, meaning that its share price is 15% more volatile than the S&P 500.

Earnings and Valuation

This table compares Hennessy Advisors and Sound Point Meridian Capital”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Hennessy Advisors	$33.01 million	2.45	$9.96 million	$1.05	9.74
Sound Point Meridian Capital	-$121.96 million	-1.71	-$125.85 million	($6.14)	-1.66

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

Analyst Recommendations

This is a summary of current ratings for Hennessy Advisors and Sound Point Meridian Capital, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Hennessy Advisors	0	1	0	0	2.00
Sound Point Meridian Capital	1	2	1	0	2.00

Sound Point Meridian Capital has a consensus target price of $16.10, suggesting a potential upside of 58.08%. Given Sound Point Meridian Capital’s higher possible upside, analysts clearly believe Sound Point Meridian Capital is more favorable than Hennessy Advisors.

Summary

Hennessy Advisors beats Sound Point Meridian Capital on 10 of the 15 factors compared between the two stocks.

About Hennessy Advisors

Hennessy Advisors, Inc. is an employee owned investment manager. It provides its services to Hennessy Funds and investment companies. The firm launches and manages equity, fixed income, and balanced mutual funds. It invests in the public equity and fixed income markets across the globe. The firm primarily invests in growth stocks of companies. It conducts in-house research to make its investments. Hennessy Advisors, Inc. was founded in 1989 and is based in Novato, California with additional offices in Boston, Massachusetts and Chapel Hill, North Carolina.

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.