Contrasting Jefferies Financial Group (NYSE:JEF) & OFS Capital (NASDAQ:OFS)

Jefferies Financial Group (NYSE:JEF) and OFS Capital (NASDAQ:OFS) are both finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their valuation, analyst recommendations, dividends, earnings, profitability, risk and institutional ownership.

Dividends

Jefferies Financial Group pays an annual dividend of $1.60 per share and has a dividend yield of 2.8%. OFS Capital pays an annual dividend of $0.68 per share and has a dividend yield of 17.9%. Jefferies Financial Group pays out 44.7% of its earnings in the form of a dividend. OFS Capital pays out -41.2% 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. Jefferies Financial Group has raised its dividend for 2 consecutive years and OFS Capital has raised its dividend for 3 consecutive years. OFS Capital is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Jefferies Financial Group and OFS Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Jefferies Financial Group	7.58%	9.23%	1.31%
OFS Capital	-62.24%	7.46%	2.67%

Analyst Recommendations

This is a breakdown of current ratings and recommmendations for Jefferies Financial Group and OFS Capital, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Jefferies Financial Group	0	5	2	0	2.29
OFS Capital	1	1	0	0	1.50

Jefferies Financial Group currently has a consensus target price of $62.62, indicating a potential upside of 10.98%. OFS Capital has a consensus target price of $7.00, indicating a potential upside of 84.70%. Given OFS Capital’s higher probable upside, analysts plainly believe OFS Capital is more favorable than Jefferies Financial Group.

Volatility & Risk

Jefferies Financial Group has a beta of 1.54, meaning that its share price is 54% more volatile than the S&P 500. Comparatively, OFS Capital has a beta of 0.85, meaning that its share price is 15% less volatile than the S&P 500.

Insider and Institutional Ownership

60.9% of Jefferies Financial Group shares are held by institutional investors. Comparatively, 10.8% of OFS Capital shares are held by institutional investors. 19.9% of Jefferies Financial Group shares are held by insiders. Comparatively, 0.5% of OFS Capital shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Earnings & Valuation

This table compares Jefferies Financial Group and OFS Capital”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Jefferies Financial Group	$11.85 billion	0.92	$710.47 million	$3.58	15.76
OFS Capital	$40.69 million	1.25	-$33.09 million	($1.65)	-2.30

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

Summary

Jefferies Financial Group beats OFS Capital on 11 of the 17 factors compared between the two stocks.

About Jefferies Financial Group

Jefferies Financial Group Inc. operates as an investment banking and capital markets firm in the Americas, Europe, the Middle East, and the Asia-Pacific. The company operates in two segments, Investment Banking and Capital Markets, and Asset Management. It provides investment banking, advisory services with respect to mergers or acquisitions, debt financing, restructurings or recapitalizations, and private capital advisory transactions; underwriting and placement services related to corporate debt, municipal bonds, mortgage-backed and asset-backed securities, equity and equity-linked securities, and loan syndication services; and corporate lending services. The company also offers financing, securities lending, and other prime brokerage services; equities research, sales, and trading services; wealth management services; and online foreign exchange trading services. In addition, it provides investment grade distressed debt securities, U.S. and European government and agency securities, municipal bonds, leveraged loans, emerging markets debt, and interest rate and credit index derivative products; and manages and offers services to a diverse group of alternative asset management platforms across a spectrum of investment strategies and asset classes. The company was formerly known as Leucadia National Corporation and changed its name to Jefferies Financial Group Inc. in May 2018. Jefferies Financial Group Inc. was founded in 1962 and is headquartered in New York, New York.

About OFS Capital

OFS Capital Corporation is a business development company specializing in direct and fund investments as well as add-on acquisitions. It provides flexible capital solutions primarily through debt capital and to a lesser extent, minority equity investments serving the needs of U.S.-based middle-market companies across a broad array of industries. It does not invest in operational turnarounds or start-up businesses. For direct, it specializes in debt and structured equity investments, recapitalizations and refinancing, management and leveraged buyouts, acquisition financings, ownership transition, shareholder liquidity events, growth capital, independent sponsor transactions, ESOPs, and minority investments in the lower middle market companies. It invests in the aerospace and defense, business services, consumer products and services, construction & building, durable goods, capital equipment, automotive, food and beverage, healthcare & pharmaceutical, specialty chemicals, transportation cargo and logistics, value added distribution, franchising, and industrial and niche manufacturing sectors. The firm invests in companies based in United States. It seeks to invest between $3 million and $35 million, revenues between $15 million and $300 million, annual EBITDA between $5 million and $50 million, and Enterprise value between $10 million and $500 million. The firm seeks to invest in companies with debt investment values between $5 million and $25 million. The fund uses senior secured, unitranche loans, first-lien, second lien, subordinated/ mezzanine loans, warrants, and preferred equity securities and common equity securities. It prefers to take a minority as well as majority stake in the investments made. It also co-invests with its partners for additional capital.