Reviewing Prospect Capital (NASDAQ:PSEC) and SEI Investments (NASDAQ:SEIC)

SEI Investments (NASDAQ:SEIC) and Prospect Capital (NASDAQ:PSEC) are both finance companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, valuation, earnings, profitability, analyst recommendations, risk and institutional ownership.

Profitability

This table compares SEI Investments and Prospect Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
SEI Investments	31.09%	30.21%	26.06%
Prospect Capital	-69.68%	12.14%	5.59%

Volatility and Risk

SEI Investments has a beta of 0.96, indicating that its share price is 4% less volatile than the S&P 500. Comparatively, Prospect Capital has a beta of 0.86, indicating that its share price is 14% less volatile than the S&P 500.

Earnings and Valuation

This table compares SEI Investments and Prospect Capital”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
SEI Investments	$2.25 billion	4.36	$581.19 million	$5.44	14.71
Prospect Capital	-$197.65 million	-6.36	-$469.92 million	($0.86)	-3.10

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

Dividends

SEI Investments pays an annual dividend of $0.98 per share and has a dividend yield of 1.2%. Prospect Capital pays an annual dividend of $0.54 per share and has a dividend yield of 20.2%. SEI Investments pays out 18.0% of its earnings in the form of a dividend. Prospect Capital pays out -62.8% 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. SEI Investments has raised its dividend for 34 consecutive years. Prospect Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a summary of recent ratings and price targets for SEI Investments and Prospect Capital, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
SEI Investments	0	4	4	0	2.50
Prospect Capital	2	0	0	0	1.00

SEI Investments currently has a consensus price target of $104.40, indicating a potential upside of 30.43%. Prospect Capital has a consensus price target of $2.50, indicating a potential downside of 6.37%. Given SEI Investments’ stronger consensus rating and higher possible upside, equities research analysts clearly believe SEI Investments is more favorable than Prospect Capital.

Insider & Institutional Ownership

70.6% of SEI Investments shares are owned by institutional investors. Comparatively, 9.1% of Prospect Capital shares are owned by institutional investors. 14.6% of SEI Investments shares are owned by company insiders. Comparatively, 28.0% of Prospect Capital shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Summary

SEI Investments beats Prospect Capital on 14 of the 17 factors compared between the two stocks.

About SEI Investments

SEI Investments Company is a publicly owned asset management holding company. Through its subsidiaries, the firm provides wealth management, retirement and investment solutions, asset management, asset administration, investment processing outsourcing solutions, financial services, and investment advisory services to its clients. It provides its services to private banks, independent financial advisers, institutional investors, investment managers, investment advisors, wealth management organizations, corporations, retirement scheme sponsors, not-for-profit organizations, hedge fund managers, registered investment advisers, independent broker-dealers, financial planners, life insurance agents, defined-benefit schemes, defined-contribution schemes, endowments, foundations, and board-designated fund, through its subsidiaries. Through its subsidiaries, the firm manages separate client-focused portfolios. It also launches and manages equity, fixed income, and balanced mutual funds, through its subsidiaries. Through its subsidiaries, the firm invests in public equity and fixed income markets. It employs fundamental and quantitative analysis with a focus on top-down and bottom-up analysis to make its investments, through its subsidiaries. SEI Investments Company was founded in 1968 and is based in Oaks, Pennsylvania.

About Prospect Capital

Prospect Capital Corporation is a business development company. It specializes in middle market, mature, mezzanine finance, later stage, emerging growth, leveraged buyouts, refinancing, acquisitions, recapitalizations, turnaround, growth capital, development, capital expenditures and subordinated debt tranches of collateralized loan obligations, cash flow term loans, market place lending and bridge transactions. It also makes real estate investments particularly in multi-family residential real estate asset class. The fund makes secured debt, senior debt, senior and secured term loans, unitranche debt, first-lien and second lien, private debt, private equity, mezzanine debt, and equity investments in private and microcap public businesses. It focuses on both primary origination and secondary loans/portfolios and invests in situations like debt financings for private equity sponsors, acquisitions, dividend recapitalizations, growth financings, bridge loans, cash flow term loans, real estate financings/investments. It also focuses on investing in small-sized and medium-sized private companies rather than large public companies. The fund typically invests across all industry sectors, with a particular expertise in the energy and industrial sectors. It invests in aerospace and defense, chemicals, conglomerate services, consumer services, ecological, electronics, financial services, machinery, manufacturing, media, pharmaceuticals, retail, software, specialty minerals, textiles and leather, transportation, oil and gas production, coal production, materials, industrials, consumer discretionary, information technology, utilities, pipeline, storage, power generation and distribution, renewable and clean energy, oilfield services, healthcare, food and beverage, education, business services, and other select sectors. It prefers to invest in the United States and Canada. The fund seeks to invest between $10 million to $500 million per transaction in companies with EBITDA between $5 million and $150 million, sales value between $25 million and $500 million, and enterprise value between $5 million and $1000 million. It fund also co-invests for larger deals. The fund seeks control acquisitions by providing multiple levels of the capital structure. The fund focuses on sole, agented, club, or syndicated deals.