Fidus Investment (FDUS) & The Carlyle Group (CG) Critical Review

The Carlyle Group (NASDAQ:CG) and Fidus Investment (NASDAQ:FDUS) are both finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their analyst recommendations, institutional ownership, earnings, valuation, profitability, risk and dividends.

Dividends

The Carlyle Group pays an annual dividend of $1.68 per share and has a dividend yield of 9.0%. Fidus Investment pays an annual dividend of $1.56 per share and has a dividend yield of 11.0%. The Carlyle Group pays out 63.9% of its earnings in the form of a dividend. Fidus Investment pays out 109.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Fidus Investment has increased its dividend for 4 consecutive years. Fidus Investment is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Risk and Volatility

The Carlyle Group has a beta of 1.69, meaning that its share price is 69% more volatile than the S&P 500. Comparatively, Fidus Investment has a beta of 1.19, meaning that its share price is 19% more volatile than the S&P 500.

Earnings & Valuation

This table compares The Carlyle Group and Fidus Investment’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
The Carlyle Group $2.43 billion 0.83 $244.10 million $2.63 7.13
Fidus Investment $68.61 million 5.04 $43.95 million $1.43 9.90

The Carlyle Group has higher revenue and earnings than Fidus Investment. The Carlyle Group is trading at a lower price-to-earnings ratio than Fidus Investment, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares The Carlyle Group and Fidus Investment’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
The Carlyle Group 4.56% 11.99% 2.44%
Fidus Investment 69.97% 8.25% 4.84%

Analyst Ratings

This is a summary of current ratings and price targets for The Carlyle Group and Fidus Investment, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
The Carlyle Group 0 4 7 0 2.64
Fidus Investment 0 1 1 0 2.50

The Carlyle Group currently has a consensus target price of $24.05, indicating a potential upside of 28.24%. Fidus Investment has a consensus target price of $16.00, indicating a potential upside of 13.07%. Given The Carlyle Group’s stronger consensus rating and higher probable upside, research analysts plainly believe The Carlyle Group is more favorable than Fidus Investment.

Insider and Institutional Ownership

42.0% of The Carlyle Group shares are owned by institutional investors. Comparatively, 27.8% of Fidus Investment shares are owned by institutional investors. 1.3% of Fidus Investment shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Summary

The Carlyle Group beats Fidus Investment on 10 of the 17 factors compared between the two stocks.

About The Carlyle Group

The Carlyle Group L.P. is an investment firm specializing in direct and fund of fund investments. Within direct investments, it specializes in management-led/ Leveraged buyouts, privatizations, divestitures, strategic minority equity investments, structured credit, global distressed and corporate opportunities, small and middle market, equity private placements, consolidations and buildups, senior debt, mezzanine and leveraged finance, and venture and growth capital financings, seed/startup, early venture, emerging growth, turnaround, mid venture, late venture, PIPES. The firm invests across four segments which include Corporate Private Equity, Real Assets, Global Market Strategies, and Solutions. The firm typically invests in agribusiness, ecological sector, fintech, airports, parking, Plastics, Rubber, diversified natural resources, minerals, farming, aerospace, defense, automotive, consumer, retail, industrial, infrastructure, energy, power, healthcare, software, software enabled services, semiconductors, communications infrastructure, financial technology, utilities, gaming, systems and related supply chain, electronic systems, systems, oil and gas, processing facilities, power generation assets, technology, systems, real estate, financial services, transportation, business services, telecommunications, media, and logistics sectors. Within the industrial sector, the firm invests in manufacturing, building products, packaging, chemicals, metals and mining, forestry and paper products, and industrial consumables and services. In consumer and retail sectors, it invests in food and beverage, retail, restaurants, consumer products, domestic consumption, consumer services, personal care products, direct marketing, and education. Within aerospace, defense, business services, and government services sectors, it seeks to invest in defense electronics, manufacturing and services, government contracting and services, information technology, distribution companies. In telecommunication and media sectors, it invests in cable TV, directories, publishing, entertainment and content delivery services, wireless infrastructure/services, fixed line networks, satellite services, broadband and Internet, and infrastructure. Within real estate, the firm invests in office, hotel, industrial, retail, for sale residential, student housing, hospitality, multifamily residential, homebuilding and building products, and senior living sectors. The firm seeks to make investments in growing business including those with overleveraged balance sheets. The firm seeks to hold its investments for four to six years. In the healthcare sector, it invests in healthcare services, outsourcing services, companies running clinical trials for pharmaceutical companies, managed care, pharmaceuticals, pharmaceutical related services, healthcare IT, medical, products, and devices. It seeks to invest in companies based in Sub-Saharan focusing on Ghana, Kenya, Mozambique, Botswana, Nigeria, Uganda, West Africa, North Africa and South Africa focusing on Tanzania and Zambia; Asia focusing on Pakistan, India, South East Asia, Indonesia, Philippines, Vietnam, Korea, and Japan; Australia; New Zealand; Europe focusing on France, Italy, Denmark, United Kingdom, Germany, Austria, Belgium, Finland, Iceland, Ireland, Netherlands, Norway, Portugal, Spain, Benelux , Sweden, Switzerland, Hungary, Poland, and Russia; Middle East focusing on Bahrain, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Turkey, and UAE; North America focusing on United States which further invest in Southeastern United States, Texas, Boston, San Francisco Bay Area and Pacific Northwest; Asia Pacific; Soviet Union, Central-Eastern Europe, and Israel; Nordic region; and South America focusing on Mexico, Argentina, Brazil, Chile, and Peru. The firm seeks to invest in food, financial, and healthcare industries in Western China. In the real estate sector, the firm seeks to invest in various locations across Europe focusing on France and Central Europe, United States, Asia focusing on China, and Latin America. It typically invests between $5 million and $50 million for venture investments and between $20 million and $1 billion for buyouts in companies with enterprise value of between $37.15 million and $1000 million and sales value of $10 million and $500 million. It seeks to invest in companies with market capitalization greater than $50 million. It prefers to take a majority stake. It typically holds its investments for three to five years. Within automotive and transportation sectors, the firm seeks to hold its investments in for four to six years. While investing in Japan, it does not invest in companies with more than 1,000 employees and prefers companies' worth between $100 million and $150 million. The firm originates, structures, and acts as lead equity investor in the transactions. The Carlyle Group L.P. was founded in 1987 and is based in Washington, District of Columbia with additional offices in 20 countries across six continents (North America, South America, Asia, Australia, Europe, and Africa).

About Fidus Investment

Fidus Investment Corporation is a business development company specializing in leveraged buyouts, refinancings, change of ownership transactions, recapitalizations, strategic acquisitions, mezzanine, growth capital, business expansion, lower middle market investments, debt investments, subordinated and second lien loans, senior secured and unitranche debt, preferred equity, warrants, subordinated debt, senior subordinated notes, junior secured loans, and unitranche loans. It does not invest in turnarounds or distressed situations. The fund prefers to invest in aerospace and defense, business services, consumer products and services including retail, food, and beverage, healthcare products and services, industrial products and services, information technology services, niche manufacturing, transportation and logistics, and value-added distribution sectors. It seeks to invest in companies based in United States. The fund typically invests between $5 million and $15 million per transaction in companies with annual revenues between $10 million and $150 million and an annual EBITDA between $3 million and $20 million, but it can occasionally invest in larger or smaller companies. It seeks to acquire minority equity stakes and board observation rights in conjunction with its investments.

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