AllianceBernstein (NYSE:AB) vs. Prospect Capital (NASDAQ:PSEC) Financial Analysis

AllianceBernstein (NYSE:AB) and Prospect Capital (NASDAQ:PSEC) are both finance companies, but which is the better stock? We will compare the two companies based on the strength of their institutional ownership, profitability, earnings, dividends, valuation, risk and analyst recommendations.

Dividends

AllianceBernstein pays an annual dividend of $3.32 per share and has a dividend yield of 9.0%. Prospect Capital pays an annual dividend of $0.42 per share and has a dividend yield of 17.7%. AllianceBernstein pays out 102.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Prospect Capital pays out -113.5% of its earnings in the form of a dividend. Prospect Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares AllianceBernstein and Prospect Capital”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
AllianceBernstein	$4.53 billion	0.76	$299.84 million	$3.25	11.37
Prospect Capital	$719.44 million	1.65	-$469.92 million	($0.37)	-6.41

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

Insider & Institutional Ownership

19.3% of AllianceBernstein shares are held by institutional investors. Comparatively, 9.1% of Prospect Capital shares are held by institutional investors. 2.7% of AllianceBernstein shares are held by company insiders. Comparatively, 0.0% of Prospect Capital shares are held 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.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
AllianceBernstein	6.69%	23.11%	23.10%
Prospect Capital	-10.42%	12.03%	5.43%

Analyst Ratings

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

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
AllianceBernstein	1	4	3	0	2.25
Prospect Capital	2	0	0	0	1.00

AllianceBernstein presently has a consensus target price of $40.25, suggesting a potential upside of 8.90%. Prospect Capital has a consensus target price of $2.00, suggesting a potential downside of 15.61%. Given AllianceBernstein’s stronger consensus rating and higher possible upside, equities research analysts clearly believe AllianceBernstein is more favorable than Prospect Capital.

Volatility & Risk

AllianceBernstein has a beta of 0.83, suggesting that its share price is 17% less volatile than the S&P 500. Comparatively, Prospect Capital has a beta of 0.82, suggesting that its share price is 18% less volatile than the S&P 500.

Summary

AllianceBernstein beats Prospect Capital on 13 of the 16 factors compared between the two stocks.

About AllianceBernstein

AllianceBernstein Holding L.P. is a publicly owned investment manager. The firm is a related adviser The firm manages separate client focused portfolios for its clients. The firm primarily invests in common and preferred stocks, warrants and convertible securities, government and corporate fxed-income securities, commodities, currencies, real estate-related assets and infation-protected securities. The firm employs quantitative analysis along with long-term purchases, short-term purchases, trading, short sales, margin transactions, option strategies including writing covered options, uncovered options and spread strategies to make its investments. The firm obtains external research to complement its in-house research. The firm was formerly known as Alliance Capital Management Holding LP. AllianceBernstein Holding L.P. was founded in 1967 and is based in Nashville,Tennessee.

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.