Contrasting Garrison Capital (GARS) & Capitala Finance (CPTA)

Garrison Capital (NASDAQ: GARS) and Capitala Finance (NASDAQ:CPTA) are both small-cap finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their dividends, risk, institutional ownership, earnings, profitability, valuation and analyst recommendations.

Dividends

Garrison Capital pays an annual dividend of $1.12 per share and has a dividend yield of 13.8%. Capitala Finance pays an annual dividend of $1.00 per share and has a dividend yield of 12.0%. Garrison Capital pays out 104.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Capitala Finance pays out 102.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Profitability

This table compares Garrison Capital and Capitala Finance’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Garrison Capital 32.34% 9.58% 4.38%
Capitala Finance -24.84% 6.09% 2.55%

Valuation and Earnings

This table compares Garrison Capital and Capitala Finance’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Garrison Capital $36.62 million 3.56 $6.22 million $1.07 7.60
Capitala Finance $51.09 million 2.60 -$6.98 million $0.98 8.47

Garrison Capital has higher earnings, but lower revenue than Capitala Finance. Garrison Capital is trading at a lower price-to-earnings ratio than Capitala Finance, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of current ratings and price targets for Garrison Capital and Capitala Finance, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Garrison Capital 0 0 2 0 3.00
Capitala Finance 0 2 1 0 2.33

Garrison Capital presently has a consensus price target of $10.50, suggesting a potential upside of 29.15%. Capitala Finance has a consensus price target of $11.75, suggesting a potential upside of 41.57%. Given Capitala Finance’s higher possible upside, analysts clearly believe Capitala Finance is more favorable than Garrison Capital.

Institutional & Insider Ownership

25.9% of Garrison Capital shares are owned by institutional investors. Comparatively, 16.8% of Capitala Finance shares are owned by institutional investors. 5.8% of Garrison Capital shares are owned by insiders. Comparatively, 9.1% of Capitala Finance shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Risk & Volatility

Garrison Capital has a beta of 0.2, meaning that its stock price is 80% less volatile than the S&P 500. Comparatively, Capitala Finance has a beta of 0.96, meaning that its stock price is 4% less volatile than the S&P 500.

Summary

Garrison Capital beats Capitala Finance on 10 of the 16 factors compared between the two stocks.

Garrison Capital Company Profile

Garrison Capital Inc. is a managed, closed-end, non-diversified management investment company. The Company’s investment objective is to generate current income and capital appreciation by making investments primarily in debt securities and loans of the United States-based middle-market companies, which it defines as those having annual earnings before interest, taxes and depreciation, or EBITDA, of certain amount. It invests or provides direct lending in first lien senior secured loans, second lien senior secured loans, one-stop senior secured loans or unitranche loans, subordinated or mezzanine loans, unsecured consumer loans and to a lesser extent, selected equity co-investments in middle-market companies. The Company intends to generate risk-adjusted net returns by assembling a portfolio of investments. The Company’s investment advisor is Garrison Capital Advisers LLC.

Capitala Finance Company Profile

Capitala Finance Corp. is a Business Development Company specializing in traditional mezzanine, senior subordinated and unitranche debt, first-lien and second-lien loans, equity investments in sponsored and non-sponsored lower and traditional middle market companies. The fund targets companies in the business services, commercial and professional services, manufacturing, consumer and retail, energy, and health-care industries. It typically considers investments in the United States. The fund invests $5 million and $50 million per transaction in companies with greater than $4.5 million of TTM EBITDA. It may also invest in senior secured positions in "stretch" senior secured loans. The fund makes minority equity co-investments, alongside management or financial sponsors.

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