Source Capital (NYSE:SOR) and MVC Capital (NYSE:MVC) are both small-cap finance companies, but which is the better business? We will contrast the two businesses based on the strength of their institutional ownership, dividends, analyst recommendations, profitability, earnings, valuation and risk.
Earnings & Valuation
This table compares Source Capital and MVC Capital’s top-line revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|MVC Capital||$22.89 million||6.91||-$10.53 million||$0.20||44.60|
This table compares Source Capital and MVC Capital’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
Source Capital pays an annual dividend of $1.00 per share and has a dividend yield of 2.7%. MVC Capital pays an annual dividend of $0.60 per share and has a dividend yield of 6.7%. MVC Capital pays out 300.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. MVC Capital has increased its dividend for 2 consecutive years. MVC Capital is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Insider and Institutional Ownership
44.1% of Source Capital shares are owned by institutional investors. Comparatively, 41.3% of MVC Capital shares are owned by institutional investors. 77.0% of Source Capital shares are owned by insiders. Comparatively, 12.6% of MVC Capital shares are owned by 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 and Risk
Source Capital has a beta of 0.77, suggesting that its share price is 23% less volatile than the S&P 500. Comparatively, MVC Capital has a beta of 0.77, suggesting that its share price is 23% less volatile than the S&P 500.
This is a summary of current ratings for Source Capital and MVC Capital, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
MVC Capital has a consensus target price of $11.00, suggesting a potential upside of 23.32%. Given MVC Capital’s higher possible upside, analysts clearly believe MVC Capital is more favorable than Source Capital.
MVC Capital beats Source Capital on 7 of the 11 factors compared between the two stocks.
About Source Capital
Source Capital, Inc. is a close-ended balanced fund launched and managed by First Pacific Advisors, LLC. The fund invests in the public equity markets of the United States. It seeks to invest in the stocks of companies operating across diversified sectors. The fund primarily invests in value stocks of small to mid cap companies. It employs fundamental analysis with a bottom-up stock selection approach, focusing on such factors as high liquidity, relatively unleveraged balance sheets, and long-term ability to earn above-average returns on capital to create its portfolio. The fund benchmarks the performance of its portfolio against the Russell 2500 Index, the S&P 500 Index, and the Nasdaq Composite Index. Source Capital, Inc. was formed in June 1, 1968 and is domiciled in the United States.
About MVC Capital
MVC Capital, Inc. is a business development company specializing in equity, acquisition financing, mezzanine financing, management buyouts, leveraged buildups, corporate partnerships, PIPE transactions, going private transactions, private company recapitalizations, operational turnarounds, and growth and expansion capital transaction financing. The company seeks to invest in mature, small, and middle-market companies. It seeks to invest in companies in the consumer products, business services, industrial manufacturing and services, automotive retailing, energy, food and food service, financial services, insurance, industrial distribution and value-added distribution, medical devices and equipment, specialty chemicals, and security sectors. The company prefers to invest in companies based in the United States. The firm typically invests between $3 million and $25 million for control and non-control stakes in companies with revenues between $10 million and $150 million and EBITDA between $3 million and $25 million. It prefers to be the lead investor in transactions and also co-invests in companies with other private equity sponsors. The company invests in the form of preferred and common equity, and warrants or rights to acquire equity interests; bridge loans; term loans; debt; cash flow loans; senior and subordinated loans; convertible securities; venture capital; mezzanine; and private equity investments. It exits its investments in the form of maturity of loan, public offering, sale, mergers and acquisitions, and financial recapitalizations. It prefers to take majority stake in companies.
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