Harvest Capital Credit (NASDAQ: HCAP) and KCAP Financial (NASDAQ:KCAP) are both small-cap financials companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, analyst recommendations, institutional ownership, risk, profitability, earnings and valuation.
Earnings and Valuation
This table compares Harvest Capital Credit and KCAP Financial’s gross revenue, earnings per share and valuation.
||Earnings Per Share
|Harvest Capital Credit
Harvest Capital Credit has higher earnings, but lower revenue than KCAP Financial. Harvest Capital Credit is trading at a lower price-to-earnings ratio than KCAP Financial, indicating that it is currently the more affordable of the two stocks.
This is a breakdown of recent ratings and price targets for Harvest Capital Credit and KCAP Financial, as reported by MarketBeat.
||Strong Buy Ratings
|Harvest Capital Credit
Harvest Capital Credit currently has a consensus price target of $13.50, indicating a potential upside of 19.57%. KCAP Financial has a consensus price target of $9.75, indicating a potential upside of 188.46%. Given KCAP Financial’s stronger consensus rating and higher possible upside, analysts clearly believe KCAP Financial is more favorable than Harvest Capital Credit.
This table compares Harvest Capital Credit and KCAP Financial’s net margins, return on equity and return on assets.
||Return on Equity
||Return on Assets
|Harvest Capital Credit
Volatility and Risk
Harvest Capital Credit has a beta of 0.66, suggesting that its share price is 34% less volatile than the S&P 500. Comparatively, KCAP Financial has a beta of 1.71, suggesting that its share price is 71% more volatile than the S&P 500.
Insider and Institutional Ownership
5.7% of Harvest Capital Credit shares are held by institutional investors. Comparatively, 20.2% of KCAP Financial shares are held by institutional investors. 9.5% of Harvest Capital Credit shares are held by company insiders. Comparatively, 8.0% of KCAP Financial shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.
Harvest Capital Credit pays an annual dividend of $1.35 per share and has a dividend yield of 12.0%. KCAP Financial pays an annual dividend of $0.40 per share and has a dividend yield of 11.8%. Harvest Capital Credit pays out 287.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. KCAP Financial pays out 666.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Harvest Capital Credit is clearly the better dividend stock, given its higher yield and lower payout ratio.
Harvest Capital Credit beats KCAP Financial on 9 of the 16 factors compared between the two stocks.
About Harvest Capital Credit
Harvest Capital Credit Corporation is an externally managed, closed-end, non-diversified management investment company. The Company operates as a business development company and provides customized financing solutions for small to mid-sized companies. Its investment objective is to generate both current income and capital appreciation by making direct investments in the form of subordinated debt, senior debt, and to a lesser extent, minority equity investments in privately-held the United States small to mid-sized companies. Its investment portfolio includes over 56.8% of senior secured term loans, 40.8% of junior secured term loans, 1.3% of equity investments and 1.1% of collateralized loan obligation (CLO) equity at fair value. It may also invest in other investments, such as loans to larger, publicly-traded companies, high-yield bonds and distressed debt securities. It may also invest in debt and equity securities issued by CLO funds. HCAP Advisors LLC is its investment adviser.
About KCAP Financial
KCAP Financial, Inc. is an internally managed, non-diversified closed-end investment company. The Company has approximately three principal areas of investments. First, the Company originates, structures and invests in senior secured term loans and mezzanine debt primarily in privately-held middle market companies (the debt securities portfolio). In addition, the Company may invest in the equity securities of privately held middle market companies. Second, the Company invests in asset management companies (the Asset Manager Affiliates) that manage collateralized loan obligation funds (CLO Funds). Third, the Company invests in debt and subordinated securities issued by CLOs (CLO fund securities). These CLO fund securities are primarily managed by its Asset Manager Affiliates, but from time-to-time the Company makes investments in CLO Fund Securities managed by other asset managers. The CLO funds typically invest in syndicated loans, high-yield bonds and other credit instruments.
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