Reviewing Orchid Island Capital (NYSE:ORC) & WhiteHorse Finance (NASDAQ:WHF)

Orchid Island Capital (NYSE:ORC) and WhiteHorse Finance (NASDAQ:WHF) are both small-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, analyst recommendations, institutional ownership, risk, profitability, earnings and valuation.

Valuation and Earnings

This table compares Orchid Island Capital and WhiteHorse Finance”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Orchid Island Capital	$414.00 million	2.37	$159.03 million	$1.48	3.32
WhiteHorse Finance	$72.67 million	2.35	$14.34 million	$0.79	10.07

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

Volatility and Risk

Orchid Island Capital has a beta of 1.6, suggesting that its share price is 60% more volatile than the S&P 500. Comparatively, WhiteHorse Finance has a beta of 0.39, suggesting that its share price is 61% less volatile than the S&P 500.

Dividends

Orchid Island Capital pays an annual dividend of $1.20 per share and has a dividend yield of 24.4%. WhiteHorse Finance pays an annual dividend of $1.00 per share and has a dividend yield of 12.6%. Orchid Island Capital pays out 81.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. WhiteHorse Finance pays out 126.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Orchid Island Capital has raised its dividend for 1 consecutive years and WhiteHorse Finance has raised its dividend for 3 consecutive years. Orchid Island Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Orchid Island Capital and WhiteHorse Finance’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Orchid Island Capital	N/A	11.87%	1.35%
WhiteHorse Finance	26.88%	8.94%	3.75%

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Orchid Island Capital and WhiteHorse Finance, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Orchid Island Capital	1	2	0	0	1.67
WhiteHorse Finance	2	2	1	0	1.80

Orchid Island Capital currently has a consensus price target of $7.50, indicating a potential upside of 52.59%. WhiteHorse Finance has a consensus price target of $7.83, indicating a potential downside of 1.53%. Given Orchid Island Capital’s higher possible upside, equities analysts clearly believe Orchid Island Capital is more favorable than WhiteHorse Finance.

Insider and Institutional Ownership

32.7% of Orchid Island Capital shares are held by institutional investors. Comparatively, 13.2% of WhiteHorse Finance shares are held by institutional investors. 0.3% of Orchid Island Capital shares are held by company insiders. Comparatively, 3.8% of WhiteHorse Finance 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.

Summary

Orchid Island Capital beats WhiteHorse Finance on 10 of the 17 factors compared between the two stocks.

About Orchid Island Capital

Orchid Island Capital, Inc., a specialty finance company, invests in residential mortgage-backed securities (RMBS) in the United States. The company’s RMBS is backed by single-family residential mortgage loans, referred as Agency RMBS. Its portfolio includes traditional pass-through Agency RMBS, such as mortgage pass through certificates and collateralized mortgage obligations; and structured Agency RMBS comprising interest only securities, inverse interest only securities, and principal only securities. The company has elected to be taxed as a real estate investment trust (REIT) for the United States federal income tax purposes. As a result, it would not be subject to corporate income tax on that portion of its net income that is distributed to stockholders, if it annually distributes dividends equal to at least 90% of its REIT taxable income to its stockholders. Orchid Island Capital, Inc. was incorporated in 2010 and is headquartered in Vero Beach, Florida.

About WhiteHorse Finance

WhiteHorse Finance, Inc. is business development company, non-diversified, closed end management company specializing in originating senior secured loans, lower middle market, growth capital industries. It invests in broadline retail, office services and supplies, building products, health care services, health care supplies, research and consulting services, application software, home furnishings, specialized consumer services, data processing and outsourced services, leisure facilities, cable, and satellite. It prefers to invest in United States. It typically invests between $5 million to $25 million in companies having enterprise value of between $50 million and $350 million.