Head to Head Contrast: KCAP Financial (KCAP) vs. Amern Cap Sr Fl/COM (ACSF)

KCAP Financial (NASDAQ: KCAP) and Amern Cap Sr Fl/COM (NASDAQ:ACSF) are both small-cap finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their risk, profitability, earnings, dividends, valuation, analyst recommendations and institutional ownership.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for KCAP Financial and Amern Cap Sr Fl/COM, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
KCAP Financial 0 2 0 0 2.00
Amern Cap Sr Fl/COM 0 0 0 0 N/A

KCAP Financial presently has a consensus target price of $3.50, indicating a potential upside of 10.41%. Given KCAP Financial’s higher possible upside, equities research analysts clearly believe KCAP Financial is more favorable than Amern Cap Sr Fl/COM.

Profitability

This table compares KCAP Financial and Amern Cap Sr Fl/COM’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
KCAP Financial 20.55% 5.57% 3.16%
Amern Cap Sr Fl/COM 35.76% 3.92% 2.15%

Dividends

KCAP Financial pays an annual dividend of $0.40 per share and has a dividend yield of 12.6%. Amern Cap Sr Fl/COM pays an annual dividend of $1.16 per share and has a dividend yield of 9.4%. KCAP Financial pays out 133.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Earnings and Valuation

This table compares KCAP Financial and Amern Cap Sr Fl/COM’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
KCAP Financial $28.26 million 4.19 $3.38 million $0.30 10.57
Amern Cap Sr Fl/COM $17.52 million 7.08 $5.70 million N/A N/A

Amern Cap Sr Fl/COM has lower revenue, but higher earnings than KCAP Financial.

Institutional and Insider Ownership

24.7% of KCAP Financial shares are held by institutional investors. Comparatively, 23.7% of Amern Cap Sr Fl/COM shares are held by institutional investors. 8.1% of KCAP Financial shares are held by insiders. Comparatively, 0.2% of Amern Cap Sr Fl/COM shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Volatility & Risk

KCAP Financial has a beta of 1.49, meaning that its stock price is 49% more volatile than the S&P 500. Comparatively, Amern Cap Sr Fl/COM has a beta of 1.13, meaning that its stock price is 13% more volatile than the S&P 500.

Summary

KCAP Financial beats Amern Cap Sr Fl/COM on 9 of the 13 factors compared between the two stocks.

About KCAP Financial

KCAP Financial, Inc. is a business development company specializing in investments in debt securities portfolio, asset manager affiliates, and CLO fund securities. The firm prefers to invest in senior secured term loans, mezzanine debt, and equity securities primarily in privately-held middle market, and buyout companies. It also invests in debt and subordinated securities issued by CLO Fund Securities. The firm also makes investments in CLO Fund Securities managed by asset managers. Its investments under CLO Fund Securities comprises of minority investment in the subordinated securities or preferred stock of CLO Funds raised and managed by firm's Asset Manager Affiliates. The firm also invests in other investments such as loans to larger, publicly-traded companies, high-yield bonds and distressed debt securities. It also invests in first and second lien term loans. The firm also prefers to invest in secured and unsecured subordinated debt. It also makes acquisitions in businesses complementary to the firm's business. It primarily invests in healthcare, cargo transport, manufacturing, real estate, educate, automotive, agriculture, aerospace/defence, packaging, electronics, finance, non-durable consumer, utilities, insurance, and food and beverage sectors. The firm typically invests $1 million to $20 million in its portfolio companies. It provides senior secured term loans from $2 million to $20 million maturing in five to seven years; second lien term loans from $5 million to $15 million maturing in six to eight years; senior unsecured loans $5 million to $23 million maturing in six to eight years; mezzanine loans from $5 million to $15 million maturing in seven to ten years; and equity investments from $1 to $5 million. The firm targets the companies with EBITDA between $7.5 million and $50 million. While investing in debt securities, it invests in those middle market firms with EBITDA between $10 million and $50 million and/or total debt between $25 million and $150 million. It invests in minority, and majority or control equity positions alongside its private equity sponsor partners. The firm invests through its own balance sheet. KCAP Financial, Inc. was founded in August 2006 and is based in New York, New York.

About Amern Cap Sr Fl/COM

American Capital Senior Floating, Ltd. is a non-diversified closed-end investment management company. The Company’s investment objective is to provide attractive, risk-adjusted returns over the long term primarily through current income while seeking to preserve its capital. It manages a leveraged portfolio composed primarily of diversified investments in first lien and second lien floating rate loans principally to the United States-based companies (collectively, Senior Floating Rate Loans or SFRLs), which are referred to as leveraged loans. It invests in equity tranches of collateralized loan obligations (CLOs), which are securitized vehicles collateralized primarily by SFRLs, and it may invest in debt tranches of CLOs. In addition, it may selectively invest in loans issued by middle market companies, mezzanine and unitranche loans and high yield bonds. It has over 80% of its assets in Senior Floating Rate Loans. The Company is managed by American Capital ACSF Management, LLC.

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