Financial Review: TICC Capital (TICC) & KCAP Financial (KCAP)

TICC Capital (NASDAQ: TICC) and KCAP Financial (NASDAQ:KCAP) are both small-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their analyst recommendations, risk, valuation, earnings, profitability, institutional ownership and dividends.

Valuation and Earnings

This table compares TICC Capital and KCAP Financial’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
TICC Capital $69.28 million 4.34 $110.36 million $1.17 4.99
KCAP Financial $36.20 million 3.55 -$1.03 million $0.06 57.33

TICC Capital has higher revenue and earnings than KCAP Financial. TICC Capital is trading at a lower price-to-earnings ratio than KCAP Financial, indicating that it is currently the more affordable of the two stocks.

Dividends

TICC Capital pays an annual dividend of $0.80 per share and has a dividend yield of 13.7%. KCAP Financial pays an annual dividend of $0.48 per share and has a dividend yield of 14.0%. TICC Capital pays out 68.4% of its earnings in the form of a dividend. KCAP Financial pays out 800.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Risk & Volatility

TICC Capital has a beta of 0.65, indicating that its stock price is 35% less volatile than the S&P 500. Comparatively, KCAP Financial has a beta of 1.7, indicating that its stock price is 70% more volatile than the S&P 500.

Insider and Institutional Ownership

16.2% of TICC Capital shares are held by institutional investors. Comparatively, 20.2% of KCAP Financial shares are held by institutional investors. 5.9% of TICC Capital shares are held by company insiders. Comparatively, 8.0% of KCAP Financial shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares TICC Capital and KCAP Financial’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
TICC Capital 94.98% 7.64% 4.95%
KCAP Financial 7.78% 6.54% 3.46%

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for TICC Capital and KCAP Financial, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
TICC Capital 3 0 1 0 1.50
KCAP Financial 0 2 1 0 2.33

TICC Capital currently has a consensus target price of $5.50, indicating a potential downside of 5.82%. KCAP Financial has a consensus target price of $9.75, indicating a potential upside of 183.43%. Given KCAP Financial’s stronger consensus rating and higher possible upside, analysts plainly believe KCAP Financial is more favorable than TICC Capital.

Summary

TICC Capital beats KCAP Financial on 9 of the 15 factors compared between the two stocks.

TICC Capital Company Profile

TICC Capital Corp. is a closed-end, non-diversified management investment company. The Company’s investment objective is to maximize its portfolio’s total return. The Company primarily focuses on seeking current income by investing primarily in corporate debt securities. The Company’s debt investments may include syndicated loans and bilateral loans. The Company holds interests in structured finance investments, including collateralized loan obligation (CLO) investment vehicles that own debt securities. CLO investments may also include warehouse facilities, which are financing structures intended to aggregate loans that may be used to form the basis of a CLO vehicle. The Company may also invest in publicly traded debt and/or equity securities. Its portfolio includes its investments in various industries, such as structured finance, telecommunication services, business services, printing and publishing, and financial intermediaries. TICC Management, LLC is its investment advisor.

KCAP Financial Company Profile

KCAP Financial, Inc. is an internally managed, non-diversified closed-end investment company. The Company has approximately three principal areas of investments. First, the Company originates, structures and invests in senior secured term loans and mezzanine debt primarily in privately-held middle market companies (the debt securities portfolio). In addition, the Company may invest in the equity securities of privately held middle market companies. Second, the Company invests in asset management companies (the Asset Manager Affiliates) that manage collateralized loan obligation funds (CLO Funds). Third, the Company invests in debt and subordinated securities issued by CLOs (CLO fund securities). These CLO fund securities are primarily managed by its Asset Manager Affiliates, but from time-to-time the Company makes investments in CLO Fund Securities managed by other asset managers. The CLO funds typically invest in syndicated loans, high-yield bonds and other credit instruments.

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