Comparing PennantPark Investment (NASDAQ:PNNT) and Westwood Holdings Group (NYSE:WHG)

Westwood Holdings Group (NYSE:WHG) and PennantPark Investment (NASDAQ:PNNT) are both small-cap finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their earnings, dividends, institutional ownership, risk, profitability, analyst recommendations and valuation.

Dividends

Westwood Holdings Group pays an annual dividend of $0.60 per share and has a dividend yield of 3.2%. PennantPark Investment pays an annual dividend of $0.48 per share and has a dividend yield of 15.9%. Westwood Holdings Group pays out 68.2% of its earnings in the form of a dividend. PennantPark Investment pays out 300.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. PennantPark Investment has raised its dividend for 1 consecutive years. PennantPark Investment is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility & Risk

Westwood Holdings Group has a beta of 0.51, suggesting that its share price is 49% less volatile than the S&P 500. Comparatively, PennantPark Investment has a beta of 0.65, suggesting that its share price is 35% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current recommendations and price targets for Westwood Holdings Group and PennantPark Investment, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Westwood Holdings Group	0	0	1	0	3.00
PennantPark Investment	1	3	1	0	2.00

PennantPark Investment has a consensus price target of $5.10, indicating a potential upside of 68.60%. Given PennantPark Investment’s higher possible upside, analysts clearly believe PennantPark Investment is more favorable than Westwood Holdings Group.

Valuation and Earnings

This table compares Westwood Holdings Group and PennantPark Investment”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Westwood Holdings Group	$97.76 million	1.83	$7.06 million	$0.88	21.41
PennantPark Investment	$21.50 million	9.18	$48.85 million	$0.16	18.91

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

Profitability

This table compares Westwood Holdings Group and PennantPark Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Westwood Holdings Group	7.73%	8.10%	6.59%
PennantPark Investment	11.33%	11.59%	4.23%

Institutional & Insider Ownership

56.6% of Westwood Holdings Group shares are held by institutional investors. Comparatively, 26.6% of PennantPark Investment shares are held by institutional investors. 17.4% of Westwood Holdings Group shares are held by insiders. Comparatively, 3.0% of PennantPark Investment shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

About Westwood Holdings Group

Westwood Holdings Group, Inc., through its subsidiaries, manages investment assets and provides services for its clients. The company operates in two segments, Advisory and Trust. The Advisory segment provides investment advisory services to corporate retirement plans, public retirement plans, endowments, foundations, individuals, and the Westwood Funds; and investment sub-advisory services to mutual funds, pooled investment vehicles, and its Trust segment. The Trust segment offers trust and custodial services; and participates in common trust funds that it sponsors to institutions and high net worth individuals. Westwood Holdings Group, Inc. was founded in 1983 and is based in Dallas, Texas.

About PennantPark Investment

PennantPark Investment Corporation, a business development company is a private equity fund specializes in direct and mezzanine investments in middle market companies. It invests in the form of mezzanine debt, senior secured loans, and equity investments. The fund typically invests in buildings and real estate, hotels, gaming and leisure, technology, telecommunications, transportation, information technology services, electronics, healthcare & pharmaceuticals, education and childcare, financial services, printing and publishing, consumer products, business services, energy & Related Services and utilities, distribution, oil and gas, media, environmental services, aerospace and defense, building materials, capital equipment, chemicals, plastics, & rubber, food & beverage, wholesale, manufacturing and basic industries and retail. It invests in equity securities and debt transactions through preferred stock, common stock, warrants, options, senior secured debt, subordinated debt, subordinated loans, first lien debt, mezzanine loans, and distressed debt securities and private equity co-investments. It seeks to invest in companies based in the United States. The fund seeks to invest between $10 million and $100 million cross the capital structure (senior secured loans, subordinated debt, and other investments) in its portfolio companies with EBITDA between $10 to $50 million. Its mezzanine loans, senior secured loans, and other investments in its portfolio companies are between $15 million and $50 million. The fund may also make non-control equity and debt investments.