Critical Survey: Sixth Street Specialty Lending (NYSE:TSLX) versus Oxford Square Capital (NASDAQ:OXSQ)

Oxford Square Capital (NASDAQ:OXSQ) and Sixth Street Specialty Lending (NYSE:TSLX) are both finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their institutional ownership, dividends, risk, earnings, profitability, analyst recommendations and valuation.

Profitability

This table compares Oxford Square Capital and Sixth Street Specialty Lending’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Oxford Square Capital	-3.35%	15.19%	8.11%
Sixth Street Specialty Lending	39.56%	13.47%	6.17%

Valuation and Earnings

This table compares Oxford Square Capital and Sixth Street Specialty Lending”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Oxford Square Capital	$42.68 million	3.38	$5.88 million	($0.02)	-92.50
Sixth Street Specialty Lending	$482.53 million	4.39	$220.02 million	$2.01	11.18

Sixth Street Specialty Lending has higher revenue and earnings than Oxford Square Capital. Oxford Square Capital is trading at a lower price-to-earnings ratio than Sixth Street Specialty Lending, indicating that it is currently the more affordable of the two stocks.

Dividends

Oxford Square Capital pays an annual dividend of $0.42 per share and has a dividend yield of 22.7%. Sixth Street Specialty Lending pays an annual dividend of $1.84 per share and has a dividend yield of 8.2%. Oxford Square Capital pays out -2,100.0% of its earnings in the form of a dividend. Sixth Street Specialty Lending pays out 91.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Oxford Square Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider & Institutional Ownership

6.4% of Oxford Square Capital shares are held by institutional investors. Comparatively, 70.3% of Sixth Street Specialty Lending shares are held by institutional investors. 8.6% of Oxford Square Capital shares are held by company insiders. Comparatively, 3.2% of Sixth Street Specialty Lending shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Analyst Ratings

This is a breakdown of current recommendations for Oxford Square Capital and Sixth Street Specialty Lending, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Oxford Square Capital	1	0	0	0	1.00
Sixth Street Specialty Lending	0	2	7	1	2.90

Sixth Street Specialty Lending has a consensus target price of $23.56, indicating a potential upside of 4.80%. Given Sixth Street Specialty Lending’s stronger consensus rating and higher probable upside, analysts plainly believe Sixth Street Specialty Lending is more favorable than Oxford Square Capital.

Volatility & Risk

Oxford Square Capital has a beta of 0.62, meaning that its share price is 38% less volatile than the S&P 500. Comparatively, Sixth Street Specialty Lending has a beta of 0.85, meaning that its share price is 15% less volatile than the S&P 500.

Summary

Sixth Street Specialty Lending beats Oxford Square Capital on 12 of the 17 factors compared between the two stocks.

About Oxford Square Capital

Oxford Square Capital Corp. is a business development company, operates as a closed-end, non-diversified management investment company. It is a private equity and mezzanine firm. The firm invests in both public and private companies. It invests in secured and unsecured senior debt, subordinated debt, junior subordinated debt, preferred stock, common stock and syndicated bank loans. The firm primarily invests in debt and/or equity securities of technology-related companies that operate in the computer software, Internet, information technology infrastructure and services, media, telecommunications and telecommunications equipment, semiconductors, hardware, technology-enabled services, semiconductor capital equipment, medical device technology, diversified technology, and networking systems sectors. It concentrates its investments in companies having annual revenues of less than $200 million and a market capitalization or enterprise value of less than $300 million. The firm invests between $5 million and $30 million per transaction. It seeks to exit its investments within 7 years. It serves as the investment adviser to TICC. Oxford Square Capital Corp., formerly known as TICC Capital Corp., was founded in 2003 and is headquartered in Greenwich, Connecticut.

About Sixth Street Specialty Lending

Sixth Street Specialty Lending, Inc. (NYSE: TSLX) is a business development company. The fund provides senior secured loans (first-lien, second-lien, and unitranche), unsecured loans, mezzanine debt, and investments in corporate bonds and equity securities and structured products, non-control structured equity, and common equity with a focus on co-investments for organic growth, acquisitions, market or product expansion, restructuring initiatives, recapitalizations, and refinancing. The fund invests in business services, software & technology, healthcare, energy, consumer & retail, manufacturing, industrials, royalty related businesses, education, and specialty finance. It seeks to finance and lending to middle market companies principally located in the United States. The fund invests in companies with enterprise value between $50 million and $1 billion or more and EBITDA between $10 million and $250 million. The transaction size is between $15 million and $350 million. The fund invests across the spectrum of the capital structure and can arrange syndicated transactions of up to $500 million and hold sizeable positions within its credits.