Garrison Capital (NASDAQ: GARS) and Waddell & Reed Financial (NYSE:WDR) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their profitability, earnings, analyst recommendations, valuation, institutional ownership, dividends and risk.
This table compares Garrison Capital and Waddell & Reed Financial’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Waddell & Reed Financial||10.10%||16.94%||10.21%|
This is a summary of current ratings and target prices for Garrison Capital and Waddell & Reed Financial, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Waddell & Reed Financial||5||2||0||0||1.29|
Garrison Capital currently has a consensus price target of $10.17, indicating a potential upside of 22.20%. Waddell & Reed Financial has a consensus price target of $18.43, indicating a potential downside of 1.40%. Given Garrison Capital’s stronger consensus rating and higher possible upside, equities analysts clearly believe Garrison Capital is more favorable than Waddell & Reed Financial.
Valuation & Earnings
This table compares Garrison Capital and Waddell & Reed Financial’s top-line revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Waddell & Reed Financial||$1.17 billion||1.34||$241.86 million||$1.39||13.45|
Waddell & Reed Financial has higher revenue and earnings than Garrison Capital.
Garrison Capital pays an annual dividend of $1.12 per share and has a dividend yield of 13.5%. Waddell & Reed Financial pays an annual dividend of $1.84 per share and has a dividend yield of 9.8%. Waddell & Reed Financial pays out 132.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Garrison Capital has increased its dividend for 6 consecutive years. Garrison Capital is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Insider & Institutional Ownership
21.6% of Garrison Capital shares are held by institutional investors. Comparatively, 96.5% of Waddell & Reed Financial shares are held by institutional investors. 5.8% of Garrison Capital shares are held by company insiders. Comparatively, 3.8% of Waddell & Reed Financial shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.
Volatility and Risk
Garrison Capital has a beta of 0.24, indicating that its stock price is 76% less volatile than the S&P 500. Comparatively, Waddell & Reed Financial has a beta of 2.04, indicating that its stock price is 104% more volatile than the S&P 500.
Garrison Capital Company Profile
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.
Waddell & Reed Financial Company Profile
Waddell & Reed Financial, Inc., incorporated on December 24, 1981, is a holding company. The Company is a mutual fund and asset management company. The Company provides investment management, investment advisory, investment product underwriting, and distribution and shareholder services administration to Waddell & Reed Advisors group of mutual funds (the Advisors Funds), Ivy Funds, Ivy Funds Variable Insurance Portfolios (Ivy Funds VIP), InvestEd Portfolios and 529 college savings plan (collectively, the Funds), and the Ivy Global Investors Fund SICAV (the SICAV) and its Ivy Global Investors sub-funds (the IGI Funds), and institutional and separately managed accounts. The Company operates its business through a distribution network. Its retail products are distributed through third parties, such as other broker-dealers, registered investment advisors and various retirement platforms or through associated independent contractor financial advisors.
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