Critical Analysis: CION Investment (NYSE:CION) and Fidus Investment (NASDAQ:FDUS)

CION Investment (NYSE:CION) and Fidus Investment (NASDAQ:FDUS) are both small-cap finance companies, but which is the better stock? We will compare the two businesses based on the strength of their profitability, earnings, analyst recommendations, dividends, risk, institutional ownership and valuation.

Risk & Volatility

CION Investment has a beta of 1.13, meaning that its share price is 13% more volatile than the S&P 500. Comparatively, Fidus Investment has a beta of 0.69, meaning that its share price is 31% less volatile than the S&P 500.

Insider & Institutional Ownership

32.0% of CION Investment shares are held by institutional investors. Comparatively, 28.1% of Fidus Investment shares are held by institutional investors. 0.6% of CION Investment shares are held by company insiders. Comparatively, 0.9% of Fidus Investment shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Earnings & Valuation

This table compares CION Investment and Fidus Investment”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
CION Investment	$240.82 million	1.57	-$20.63 million	($0.39)	-19.14
Fidus Investment	$155.87 million	4.47	$82.40 million	$2.34	7.84

Fidus Investment has lower revenue, but higher earnings than CION Investment. CION Investment is trading at a lower price-to-earnings ratio than Fidus Investment, indicating that it is currently the more affordable of the two stocks.

Dividends

CION Investment pays an annual dividend of $1.20 per share and has a dividend yield of 16.1%. Fidus Investment pays an annual dividend of $1.72 per share and has a dividend yield of 9.4%. CION Investment pays out -307.7% of its earnings in the form of a dividend. Fidus Investment pays out 73.5% 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. CION Investment has increased its dividend for 1 consecutive years. CION Investment is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares CION Investment and Fidus Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
CION Investment	-8.57%	12.42%	4.95%
Fidus Investment	52.87%	10.71%	5.81%

Analyst Recommendations

This is a breakdown of current recommendations and price targets for CION Investment and Fidus Investment, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
CION Investment	3	0	0	0	1.00
Fidus Investment	0	2	1	1	2.75

CION Investment currently has a consensus price target of $7.00, suggesting a potential downside of 6.23%. Fidus Investment has a consensus price target of $21.00, suggesting a potential upside of 14.50%. Given Fidus Investment’s stronger consensus rating and higher probable upside, analysts clearly believe Fidus Investment is more favorable than CION Investment.

Summary

Fidus Investment beats CION Investment on 11 of the 18 factors compared between the two stocks.

About CION Investment

CION Investment Corporation is a business development company. It specializes in investments in senior secured loans, including unitranche loans, First Lien, second lien loans, long-term subordinated loans, and mezzanine loans; equity interests such as warrants or options; and corporate bonds; and other debt securities in middle-market companies. The firm invests in growth capital, acquisitions, leveraged buyouts, market/product expansion, refinancing and recapitalization. The fund also invests up to 30 percent of their assets opportunistically in other types of investments, including the securities of larger public companies and foreign securities. It also makes investments in the secondary loan market. The fund does not invest in start-up companies, turnaround situations, or companies with speculative business plans. The fund prefers to invest in high tech industries, healthcare, pharmaceuticals, business services, media, chemicals, plastic, rubber, telecommunication, consumer services, advertising, printing and publishing, consumer goods, durables, diversified financials, and other industries. It also invests in homebuilding, restaurants, beverage and tobacco bars, broadcasting, distributors, Non-durable good distribution, food beverage and tobacco, energy, oil gas and consumables fuels, insurance, aerospace and defense, industrial machinery, paper and forest product machinery, information technology, metals and mining, and real estate. It primarily seeks to invest in the United States. The fund seeks to invest between $5 million and $50 million in companies with an EBITDA between $25 million and $75 million with average targeted hold of $25 million. It also purchases minority interests in the form of common or preferred equity in the target companies, typically in conjunction with its debt investments or through a co-investment with a financial sponsor. The fund seeks to exit its investments through an initial public offering of common stock, a merger, a sale, or other recapitalization.

About Fidus Investment

Fidus Investment Corporation is a business development company. It specializing in leveraged buyouts, refinancings, change of ownership transactions, recapitalizations, strategic acquisitions, mezzanine, growth capital, business expansion, lower middle market investments, debt investments, subordinated and second lien loans, senior secured and unitranche debt, preferred equity, warrants, subordinated debt, senior subordinated notes, junior secured loans, and unitranche loans. It does not invest in turnarounds or distressed situations. The fund prefers to invest in aerospace and defense, business services, consumer products and services including retail, food, and beverage, healthcare products and services, industrial products and services, information technology services, niche manufacturing, transportation and logistics, and value-added distribution sectors. It seeks to invest in companies based in United States. The fund typically invests between $5 million and $15 million per transaction in companies with annual revenues between $10 million and $150 million and an annual EBITDA between $3 million and $20 million, but it can occasionally invest in larger or smaller companies. It seeks to acquire minority equity stakes and board observation rights in conjunction with its investments.