Critical Analysis: Oaktree Capital Group (NYSE:OAK) vs. Garrison Capital (GARS)

Garrison Capital (NASDAQ: GARS) and Oaktree Capital Group (NYSE:OAK) are both finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitabiliy, dividends, institutional ownership, valuation, earnings, risk and analyst recommendations.

Dividends

Garrison Capital pays an annual dividend of $1.12 per share and has a dividend yield of 13.7%. Oaktree Capital Group pays an annual dividend of $5.24 per share and has a dividend yield of 11.1%. Oaktree Capital Group pays out 114.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Institutional & Insider Ownership

23.8% of Garrison Capital shares are held by institutional investors. Comparatively, 23.2% of Oaktree Capital Group shares are held by institutional investors. 5.8% of Garrison Capital shares are held by 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.

Risk and Volatility

Garrison Capital has a beta of 0.25, suggesting that its stock price is 75% less volatile than the S&P 500. Comparatively, Oaktree Capital Group has a beta of 0.6, suggesting that its stock price is 40% less volatile than the S&P 500.

Profitability

This table compares Garrison Capital and Oaktree Capital Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Garrison Capital -0.38% 8.24% 3.93%
Oaktree Capital Group 19.17% 20.11% 4.95%

Earnings & Valuation

This table compares Garrison Capital and Oaktree Capital Group’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Garrison Capital N/A N/A N/A N/A N/A
Oaktree Capital Group $1.51 billion 2.00 $494.45 million $4.57 10.28

Oaktree Capital Group has higher revenue and earnings than Garrison Capital.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Garrison Capital and Oaktree Capital Group, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Garrison Capital 0 7 1 0 2.13
Oaktree Capital Group 1 5 2 0 2.13

Garrison Capital currently has a consensus target price of $10.13, indicating a potential upside of 23.93%. Oaktree Capital Group has a consensus target price of $47.20, indicating a potential upside of 0.43%. Given Garrison Capital’s higher probable upside, analysts plainly believe Garrison Capital is more favorable than Oaktree Capital Group.

Summary

Oaktree Capital Group beats Garrison Capital on 7 of the 12 factors compared between the two stocks.

About Garrison Capital

Garrison Capital Inc. is a managed, closed-end, non-diversified management investment company. The Company’s investment objective is to generate current income and capital appreciation by making investments primarily in debt securities and loans of the United States-based middle-market companies, which it defines as those having annual earnings before interest, taxes and depreciation, or EBITDA, of certain amount. It invests or provides direct lending in first lien senior secured loans, second lien senior secured loans, one-stop senior secured loans or unitranche loans, subordinated or mezzanine loans, unsecured consumer loans and to a lesser extent, selected equity co-investments in middle-market companies. The Company intends to generate risk-adjusted net returns by assembling a portfolio of investments. The Company’s investment advisor is Garrison Capital Advisers LLC.

About Oaktree Capital Group

Oaktree Capital Group, LLC (Oaktree) is an investment manager specializing in alternative investments. The Company operates through investment management segment, which consists of the investment management services that the Company provides to its clients. The Company manages investments in a range of strategies within approximately six asset classes, which include corporate debt, convertible securities, distressed debt, control investing, real estate and listed equities. The Funds managed by Oaktree include commingled funds, separate accounts and collateralized loan obligation vehicles (CLOs). The commingled funds include open-end and closed-end limited partnerships in which it makes an investment and for which it serves as the general partner. CLOs are structured finance vehicles in which the Company typically makes an investment and for which it serves as collateral manager. Its clientele includes the United States pension plans and corporations and/or their pension funds.

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