Head-To-Head Comparison: PennantPark Investment (PNNT) vs. TPG Specialty Lending (TSLX)

PennantPark Investment (NASDAQ: PNNT) and TPG Specialty Lending (NYSE:TSLX) are both small-cap finance companies, but which is the superior business? We will compare the two companies based on the strength of their risk, institutional ownership, earnings, profitability, dividends, valuation and analyst recommendations.

Dividends

PennantPark Investment pays an annual dividend of $0.72 per share and has a dividend yield of 10.1%. TPG Specialty Lending pays an annual dividend of $1.56 per share and has a dividend yield of 8.6%. PennantPark Investment pays out 91.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. TPG Specialty Lending pays out 78.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Analyst Ratings

This is a summary of current recommendations and price targets for PennantPark Investment and TPG Specialty Lending, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
PennantPark Investment 0 2 3 0 2.60
TPG Specialty Lending 0 1 5 0 2.83

PennantPark Investment presently has a consensus target price of $8.30, suggesting a potential upside of 16.08%. TPG Specialty Lending has a consensus target price of $20.60, suggesting a potential upside of 13.62%. Given PennantPark Investment’s higher probable upside, equities research analysts clearly believe PennantPark Investment is more favorable than TPG Specialty Lending.

Valuation and Earnings

This table compares PennantPark Investment and TPG Specialty Lending’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
PennantPark Investment $124.53 million 4.08 $61.71 million $0.79 9.05
TPG Specialty Lending $210.90 million 5.58 $120.25 million $2.00 9.07

TPG Specialty Lending has higher revenue and earnings than PennantPark Investment. PennantPark Investment is trading at a lower price-to-earnings ratio than TPG Specialty Lending, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

44.9% of PennantPark Investment shares are owned by institutional investors. Comparatively, 61.9% of TPG Specialty Lending shares are owned by institutional investors. 2.0% of PennantPark Investment shares are owned by company insiders. Comparatively, 4.8% of TPG Specialty Lending shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Volatility and Risk

PennantPark Investment has a beta of 1.15, meaning that its stock price is 15% more volatile than the S&P 500. Comparatively, TPG Specialty Lending has a beta of 0.61, meaning that its stock price is 39% less volatile than the S&P 500.

Profitability

This table compares PennantPark Investment and TPG Specialty Lending’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
PennantPark Investment 38.78% 8.17% 4.43%
TPG Specialty Lending 54.68% 12.45% 7.21%

Summary

TPG Specialty Lending beats PennantPark Investment on 13 of the 16 factors compared between the two stocks.

PennantPark Investment Company Profile

PennantPark Investment Corporation is a closed-end, non-diversified investment company. The Company is a business development company. Its objectives are to generate both current income and capital appreciation while seeking to preserve capital through debt and equity investments primarily made to the United States middle-market companies in the form of senior secured debt, mezzanine debt and equity investments. The Company’s debt investments may generally range in maturity from 3 to 10 years and, are made to the United States and to a limited extent, non-United States corporations, partnerships and other business entities, which operate in various industries and geographical regions. In addition, it may invest up to approximately 30% of its portfolio in non-qualifying assets. It invests in sectors, such as aerospace and defense; energy/utilities; auto sector; environmental services, and beverage, among others. PennantPark Investment Advisers, LLC is the Company’s investment advisor.

TPG Specialty Lending Company Profile

TPG Specialty Lending, Inc. is an externally managed, closed-end, non-diversified management investment company. The Company is a specialty finance company focused on lending to middle-market companies. It seeks to generate current income primarily in the United States-domiciled middle-market companies through direct originations of senior secured loans and originations of mezzanine and unsecured loans and investments in corporate bonds and equity securities. The Company invests in first-lien debt, second-lien debt, mezzanine and unsecured debt and equity and other investments. Its first-lien debt may include standalone first-lien loans; last out first-lien loans; unitranche loans and secured corporate bonds. Its second-lien debt may include secured loans and secured corporate bonds, with a secondary priority behind first-lien debt. As of December 31, 2016, the Company’s portfolio was invested across 19 different industries. The Company’s investment advisor is TSL Advisers, LLC.

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