Comparing Barings Bdc (NYSE:BBDC) & Runway Growth Finance (NASDAQ:RWAY)

Barings Bdc (NYSE:BBDC) and Runway Growth Finance (NASDAQ:RWAY) 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 Barings Bdc and Runway Growth Finance, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Barings Bdc	0	3	1	1	2.60
Runway Growth Finance	2	4	2	0	2.00

Barings Bdc presently has a consensus target price of $9.50, suggesting a potential upside of 13.27%. Runway Growth Finance has a consensus target price of $8.20, suggesting a potential upside of 54.57%. Given Runway Growth Finance’s higher probable upside, analysts clearly believe Runway Growth Finance is more favorable than Barings Bdc.

Earnings and Valuation

This table compares Barings Bdc and Runway Growth Finance”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Barings Bdc	$101.66 million	8.64	$101.92 million	$0.85	9.87
Runway Growth Finance	$137.33 million	1.64	$34.05 million	($0.09)	-58.94

Barings Bdc has higher earnings, but lower revenue than Runway Growth Finance. Runway Growth Finance is trading at a lower price-to-earnings ratio than Barings Bdc, indicating that it is currently the more affordable of the two stocks.

Dividends

Barings Bdc pays an annual dividend of $1.04 per share and has a dividend yield of 12.4%. Runway Growth Finance pays an annual dividend of $1.32 per share and has a dividend yield of 24.9%. Barings Bdc pays out 122.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Runway Growth Finance pays out -1,466.7% of its earnings in the form of a dividend. Barings Bdc has raised its dividend for 3 consecutive years. Runway Growth Finance is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility & Risk

Barings Bdc has a beta of 0.58, suggesting that its share price is 42% less volatile than the S&P 500. Comparatively, Runway Growth Finance has a beta of 0.66, suggesting that its share price is 34% less volatile than the S&P 500.

Profitability

This table compares Barings Bdc and Runway Growth Finance’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Barings Bdc	32.45%	10.08%	4.33%
Runway Growth Finance	-2.00%	10.87%	5.37%

Institutional and Insider Ownership

44.1% of Barings Bdc shares are held by institutional investors. Comparatively, 64.6% of Runway Growth Finance shares are held by institutional investors. 0.6% of Barings Bdc shares are held by company insiders. Comparatively, 1.0% of Runway Growth 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

Runway Growth Finance beats Barings Bdc on 10 of the 18 factors compared between the two stocks.

About Barings Bdc

Barings BDC, Inc. is a publicly traded, externally managed investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. It seeks to invest primarily in senior secured loans, first lien debt, unitranche, second lien debt, subordinated debt, equity co-investments and senior secured private debt investments in private middle-market companies that operate across a wide range of industries. It specializes in mezzanine, leveraged buyouts, management buyouts, ESOPs, change of control transactions, acquisition financings, growth financing, and recapitalizations in lower middle market, mature, and later stage companies. It invests in manufacturing and distribution; business services and technology; transportation and logistics; consumer product and services. It invests in United States. It invests in companies with EBITDA of $10 million to $75 million, typically in private equity sponsor backed.

About Runway Growth Finance

Runway Growth Finance Corp. is a business development company specializing investments in senior-secured loans to late stage and growth companies. It prefers to make investments in companies engaged in the technology, life sciences, healthcare and information services, business services and select consumer services and products sectors. It prefers to investments in companies engaged in electronic equipment and instruments, systems software, hardware, storage and peripherals and specialized consumer services, application software, healthcare technology, internet software and services, data processing and outsourced services, internet retail, human resources and employment services, biotechnology, healthcare equipment and education services. It invests in senior secured loans between $10 million and $75 million.