Comparing Barings BDC (NYSE:BBDC) and Houlihan Lokey (NYSE:HLI)

Barings BDC (NYSE:BBDC) and Houlihan Lokey (NYSE:HLI) are both finance companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, profitability, risk, valuation, institutional ownership, analyst recommendations and earnings.

Analyst Ratings

This is a summary of current recommendations and price targets for Barings BDC and Houlihan Lokey, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Barings BDC 0 0 4 0 3.00
Houlihan Lokey 0 1 5 0 2.83

Barings BDC currently has a consensus target price of $11.20, indicating a potential upside of 13.51%. Houlihan Lokey has a consensus target price of $49.78, indicating a potential upside of 16.87%. Given Houlihan Lokey’s higher possible upside, analysts plainly believe Houlihan Lokey is more favorable than Barings BDC.

Dividends

Barings BDC pays an annual dividend of $0.52 per share and has a dividend yield of 5.3%. Houlihan Lokey pays an annual dividend of $1.24 per share and has a dividend yield of 2.9%. Houlihan Lokey pays out 43.2% of its earnings in the form of a dividend. Houlihan Lokey has increased its dividend for 3 consecutive years.

Valuation and Earnings

This table compares Barings BDC and Houlihan Lokey’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Barings BDC $80.22 million 6.30 -$114.28 million N/A N/A
Houlihan Lokey $1.08 billion 2.60 $159.11 million $2.87 14.84

Houlihan Lokey has higher revenue and earnings than Barings BDC.

Profitability

This table compares Barings BDC and Houlihan Lokey’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Barings BDC -152.61% -1.28% -0.60%
Houlihan Lokey 15.45% 22.75% 14.88%

Risk & Volatility

Barings BDC has a beta of 0.66, suggesting that its stock price is 34% less volatile than the S&P 500. Comparatively, Houlihan Lokey has a beta of 0.96, suggesting that its stock price is 4% less volatile than the S&P 500.

Insider & Institutional Ownership

42.8% of Barings BDC shares are held by institutional investors. Comparatively, 62.6% of Houlihan Lokey shares are held by institutional investors. 0.3% of Barings BDC shares are held by company insiders. Comparatively, 38.2% of Houlihan Lokey shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Summary

Houlihan Lokey beats Barings BDC on 11 of the 15 factors compared between the two stocks.

Barings BDC Company Profile

Barings BDC, Inc. (NYSE:BBDC) is a business development company specializing in private equity and mezzanine investments. It focuses on leveraged buyouts, management buyouts, ESOPs, change of control transactions, acquisition financings, growth financing, and recapitalizations in lower middle market, mature, and later stage companies. The firm prefers to make investments in many business sectors including manufacturing, distribution, transportation, energy, communications, health services, restaurants, media, and others. It primarily invests in companies located throughout the United States, with an emphasis on the Southeast and Midatlantic. The firm makes equity investments between $1 million and $25 million and debt investments between $5 million and $30 million per transaction, in companies having annual revenues between $20 million and $200 million and EBITDA between $3 million and $35 million and can also co-invest. It typically makes investments between $5 million and $35 million. It primarily invests in senior subordinated debt securities secured by second lien security interests in portfolio company assets, coupled with equity interests. The firm also invests in senior debt securities secured by first lien security interests in portfolio companies. Triangle Capital Corporation was incorporated on October 10, 2006 and is based in Raleigh, North Carolina.

Houlihan Lokey Company Profile

Houlihan Lokey, Inc., an investment banking company, provides merger and acquisition (M&A), financing, financial restructuring, and financial advisory services worldwide. It operates in three segments: Corporate Finance, Financial Restructuring, and Financial Advisory Services. The Corporate Finance segment offers general financial advisory services; and advises public and private institutions on buy-side and sell-side transactions, leveraged loans, private mezzanine debt, high-yield debt, initial public offerings, follow-ons, convertibles, equity private placements, private equity, and liability management transactions, as well as financial sponsors on various transactions. It also provides financing solutions and capital-raising advisory services for publicly-held and multinational corporations, financial sponsors, and privately-held companies. The Financial Restructuring segment advises debtors, creditors, and other parties-in-interest related to recapitalization/deleveraging transactions. It also provides a range of advisory services, including structuring, negotiation, and confirmation of plans of reorganization; structuring and analysis of exchange offers; corporate viability assessment; dispute resolution and expert testimony; and procuring debtor in possession financing. The Financial Advisory Services segment offers valuations of various assets, such as companies, illiquid debt and equity securities, and intellectual property. It also provides fairness opinions in connection with M&A and other transactions, and solvency opinions in connection with corporate spin-offs and dividend recapitalizations; and other types of financial opinions in connection with other transactions. In addition, this segment offers dispute resolution and strategic consulting services. It serves corporations, financial sponsors, and government agencies. The company was founded in 1972 and is headquartered in Los Angeles, California.

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