Fidus Investment Corp (NASDAQ: FDUS) and Stellus Capital Investment Corporation (NYSE:SCM) are both small-cap financials companies, but which is the better stock? We will contrast the two companies based on the strength of their institutional ownership, analyst recommendations, risk, earnings, dividends, valuation and profitability.
This is a breakdown of current ratings for Fidus Investment Corp and Stellus Capital Investment Corporation, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Fidus Investment Corp||0||2||1||0||2.33|
|Stellus Capital Investment Corporation||0||1||2||0||2.67|
Fidus Investment Corp presently has a consensus target price of $17.33, suggesting a potential upside of 8.33%. Stellus Capital Investment Corporation has a consensus target price of $15.00, suggesting a potential upside of 10.29%. Given Stellus Capital Investment Corporation’s stronger consensus rating and higher probable upside, analysts clearly believe Stellus Capital Investment Corporation is more favorable than Fidus Investment Corp.
Institutional and Insider Ownership
30.7% of Fidus Investment Corp shares are owned by institutional investors. Comparatively, 26.5% of Stellus Capital Investment Corporation shares are owned by institutional investors. 1.3% of Fidus Investment Corp shares are owned by insiders. Comparatively, 4.2% of Stellus Capital 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.
Volatility and Risk
Fidus Investment Corp has a beta of 1.12, suggesting that its stock price is 12% more volatile than the S&P 500. Comparatively, Stellus Capital Investment Corporation has a beta of 0.56, suggesting that its stock price is 44% less volatile than the S&P 500.
Valuation and Earnings
This table compares Fidus Investment Corp and Stellus Capital Investment Corporation’s top-line revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Fidus Investment Corp||N/A||N/A||N/A||$1.93||8.29|
|Stellus Capital Investment Corporation||N/A||N/A||N/A||$2.12||6.42|
Stellus Capital Investment Corporation is trading at a lower price-to-earnings ratio than Fidus Investment Corp, indicating that it is currently the more affordable of the two stocks.
This table compares Fidus Investment Corp and Stellus Capital Investment Corporation’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Fidus Investment Corp||57.65%||10.75%||6.79%|
|Stellus Capital Investment Corporation||68.17%||10.06%||5.01%|
Fidus Investment Corp pays an annual dividend of $1.56 per share and has a dividend yield of 9.8%. Stellus Capital Investment Corporation pays an annual dividend of $1.36 per share and has a dividend yield of 10.0%. Fidus Investment Corp pays out 80.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Stellus Capital Investment Corporation pays out 64.2% of its earnings in the form of a dividend. Stellus Capital Investment Corporation is clearly the better dividend stock, given its higher yield and lower payout ratio.
Stellus Capital Investment Corporation beats Fidus Investment Corp on 8 of the 13 factors compared between the two stocks.
Fidus Investment Corp Company Profile
Fidus Investment Corporation is a closed-end, non-diversified investment company. The Company provides customized debt and equity financing solutions to lower middle-market companies. The Company’s investment objective is to provide attractive risk-adjusted returns by generating both current income from its debt investments and capital appreciation from its equity-related investments. The Company typically invests in mezzanine debt, which includes senior subordinated notes and junior secured loans. The Company structures some of its debt investments as senior secured or unitranche loans. The Company’s equity securities typically consist of either a direct minority equity investment in common or preferred stock or membership/partnership interests of a portfolio company, or it may receive warrants to buy a minority equity interest in a portfolio company in connection with a debt investment. Its investment activities are managed by Fidus Investment Advisors, LLC, its investment advisor.
Stellus Capital Investment Corporation Company Profile
Stellus Capital Investment Corporation is a closed-end, non-diversified management investment company. The Company originates and invests primarily in private middle-market companies through first lien, second lien, unitranche and mezzanine debt financing, with corresponding equity co-investments. The Company’s investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation. It invests in various sectors, such as business services, energy, general industrial, government services, healthcare, software and specialty finance. Its investment advisor is Stellus Capital Management, LLC (Stellus Capital Management). Stellus Capital Management is responsible for analyzing investment opportunities, conducting research and performing due diligence on investments, negotiating and structuring the Company’s investments, originating prospective investments, and monitoring its investments and portfolio companies on an ongoing basis.
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