Analyzing CM Finance (CMFN) and iShares Nasdaq Biotechnology Index Fund (IBB)

CM Finance (NASDAQ: CMFN) and iShares Nasdaq Biotechnology Index Fund (NASDAQ:IBB) are both finance companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, risk, institutional ownership, profitability, analyst recommendations, valuation and dividends.

Earnings and Valuation

This table compares CM Finance and iShares Nasdaq Biotechnology Index Fund’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
CM Finance $31.01 million 3.73 $23.57 million $1.64 5.15
iShares Nasdaq Biotechnology Index Fund N/A N/A N/A $90.83 3.43

CM Finance has higher revenue and earnings than iShares Nasdaq Biotechnology Index Fund. iShares Nasdaq Biotechnology Index Fund is trading at a lower price-to-earnings ratio than CM Finance, indicating that it is currently the more affordable of the two stocks.

Dividends

CM Finance pays an annual dividend of $1.00 per share and has a dividend yield of 11.8%. iShares Nasdaq Biotechnology Index Fund pays an annual dividend of $0.69 per share and has a dividend yield of 0.2%. CM Finance pays out 61.0% of its earnings in the form of a dividend. iShares Nasdaq Biotechnology Index Fund pays out 0.8% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Profitability

This table compares CM Finance and iShares Nasdaq Biotechnology Index Fund’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
CM Finance 74.32% 8.75% 4.86%
iShares Nasdaq Biotechnology Index Fund N/A N/A N/A

Insider & Institutional Ownership

43.9% of CM Finance shares are held by institutional investors. Comparatively, 60.5% of iShares Nasdaq Biotechnology Index Fund shares are held by institutional investors. 1.8% of CM Finance shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Risk and Volatility

CM Finance has a beta of 1.37, indicating that its stock price is 37% more volatile than the S&P 500. Comparatively, iShares Nasdaq Biotechnology Index Fund has a beta of 1.39, indicating that its stock price is 39% more volatile than the S&P 500.

Analyst Recommendations

This is a summary of current recommendations and price targets for CM Finance and iShares Nasdaq Biotechnology Index Fund, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
CM Finance 0 0 0 0 N/A
iShares Nasdaq Biotechnology Index Fund 0 0 1 0 3.00

Summary

CM Finance beats iShares Nasdaq Biotechnology Index Fund on 6 of the 11 factors compared between the two stocks.

About CM Finance

CM Finance Inc is an externally managed, non-diversified closed-end management investment company. The Company is a specialty finance company that invests primarily in the debt of the United States middle-market companies. The Company’s primary investment objective is to maximize total return to stockholders in the form of current income and capital appreciation by investing in debt and related equity of privately held lower middle-market companies. As of June 30, 2016, the Company’s portfolio consisted of debt and equity investments in 22 portfolio companies. It invests in unitranche loans and standalone second and first lien loans, with an emphasis on floating rate debt. It also selectively invests in mezzanine loans/structured equity and in the equity of portfolio companies through warrants and other instruments.CM Investment Partners LLC is an external investment advisor of the Company.

About iShares Nasdaq Biotechnology Index Fund

iShares Nasdaq Biotechnology ETF (the Fund), formerly iShares Nasdaq Biotechnology Index Fund, is an exchange-traded fund (ETF). The Fund seeks investment results that correspond generally to the price and yield performance of the NASDAQ Biotechnology Index (the Index). The Index contains securities of NASDAQ listed companies that are classified according to the Industry Classification Benchmark as either biotechnology or pharmaceuticals, which also meet other eligibility criteria determined by NASDAQ. The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. The Fund’s investment advisor is BlackRock Fund Advisors, which is indirectly owned by BlackRock, Inc.

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