Prospect Capital Corporation (NASDAQ: PSEC) and PennantPark Investment Corporation (NASDAQ:PNNT) are both finance companies, but which is the better stock? We will compare the two companies based on the strength of their valuation, earnings, analyst recommendations, institutional ownership, dividends, risk and profitabiliy.
This table compares Prospect Capital Corporation and PennantPark Investment Corporation’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Prospect Capital Corporation||40.82%||9.56%||5.27%|
|PennantPark Investment Corporation||53.92%||9.11%||4.72%|
This is a summary of current ratings and price targets for Prospect Capital Corporation and PennantPark Investment Corporation, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Prospect Capital Corporation||1||3||0||0||1.75|
|PennantPark Investment Corporation||0||7||2||0||2.22|
Prospect Capital Corporation currently has a consensus target price of $7.38, suggesting a potential downside of 9.17%. PennantPark Investment Corporation has a consensus target price of $8.13, suggesting a potential upside of 5.79%. Given PennantPark Investment Corporation’s stronger consensus rating and higher probable upside, analysts clearly believe PennantPark Investment Corporation is more favorable than Prospect Capital Corporation.
Institutional and Insider Ownership
16.3% of Prospect Capital Corporation shares are owned by institutional investors. Comparatively, 43.8% of PennantPark Investment Corporation shares are owned by institutional investors. 6.6% of Prospect Capital Corporation shares are owned by insiders. Comparatively, 1.9% of PennantPark Investment Corporation shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.
Risk and Volatility
Prospect Capital Corporation has a beta of 0.47, meaning that its share price is 53% less volatile than the S&P 500. Comparatively, PennantPark Investment Corporation has a beta of 1.26, meaning that its share price is 26% more volatile than the S&P 500.
Valuation and Earnings
This table compares Prospect Capital Corporation and PennantPark Investment Corporation’s gross revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Prospect Capital Corporation||N/A||N/A||N/A||$0.83||9.78|
|PennantPark Investment Corporation||N/A||N/A||N/A||$0.97||7.92|
PennantPark Investment Corporation is trading at a lower price-to-earnings ratio than Prospect Capital Corporation, indicating that it is currently the more affordable of the two stocks.
Prospect Capital Corporation pays an annual dividend of $1.00 per share and has a dividend yield of 12.3%. PennantPark Investment Corporation pays an annual dividend of $0.72 per share and has a dividend yield of 9.4%. Prospect Capital Corporation pays out 120.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. PennantPark Investment Corporation pays out 74.2% of its earnings in the form of a dividend.
PennantPark Investment Corporation beats Prospect Capital Corporation on 9 of the 13 factors compared between the two stocks.
Prospect Capital Corporation Company Profile
Prospect Capital Corporation is a financial services company. The Company primarily lends to and invests in middle market privately held companies. The Company is a closed-end investment company. Its investment objective is to generate both current income and long-term capital appreciation through debt and equity investments. The Company invests primarily in senior and subordinated debt and equity of private companies in need of capital for acquisitions, divestitures, growth, development, recapitalizations and other purposes. The Company makes investments, including lending in private equity sponsored transactions, lending directly to companies not owned by private equity firms, control investments in corporate operating companies, control investments in financial companies, investments in structured credit, real estate investments, investments in syndicated debt, aircraft leasing and online lending. The Company is managed by its investment advisor, Prospect Capital Management L.P.
PennantPark Investment Corporation Company Profile
PennantPark Investment Corporation is a closed-end, non-diversified investment company. The Company is a business development company. Its objectives are to generate both current income and capital appreciation while seeking to preserve capital through debt and equity investments primarily made to the United States middle-market companies in the form of senior secured debt, mezzanine debt and equity investments. The Company’s debt investments may generally range in maturity from 3 to 10 years and, are made to the United States and to a limited extent, non-United States corporations, partnerships and other business entities, which operate in various industries and geographical regions. In addition, it may invest up to approximately 30% of its portfolio in non-qualifying assets. It invests in sectors, such as aerospace and defense; energy/utilities; auto sector; environmental services, and beverage, among others. PennantPark Investment Advisers, LLC is the Company’s investment advisor.
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