Reviewing Sixth Street Specialty Lending (NYSE:TSLX) and Medallion Financial (NASDAQ:MFIN)

Sixth Street Specialty Lending (NYSE:TSLX) and Medallion Financial (NASDAQ:MFIN) are both finance companies, but which is the better business? We will compare the two companies based on the strength of their risk, valuation, institutional ownership, earnings, analyst recommendations, dividends and profitability.

Institutional & Insider Ownership

70.3% of Sixth Street Specialty Lending shares are held by institutional investors. Comparatively, 40.6% of Medallion Financial shares are held by institutional investors. 3.2% of Sixth Street Specialty Lending shares are held by company insiders. Comparatively, 24.6% of Medallion Financial shares are held by company 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.

Analyst Recommendations

This is a summary of current ratings and target prices for Sixth Street Specialty Lending and Medallion Financial, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Sixth Street Specialty Lending	0	1	6	1	3.00
Medallion Financial	0	0	1	0	3.00

Sixth Street Specialty Lending currently has a consensus price target of $23.06, suggesting a potential downside of 3.54%. Medallion Financial has a consensus price target of $12.00, suggesting a potential upside of 18.34%. Given Medallion Financial’s higher possible upside, analysts plainly believe Medallion Financial is more favorable than Sixth Street Specialty Lending.

Dividends

Sixth Street Specialty Lending pays an annual dividend of $1.84 per share and has a dividend yield of 7.7%. Medallion Financial pays an annual dividend of $0.48 per share and has a dividend yield of 4.7%. Sixth Street Specialty Lending pays out 97.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Medallion Financial pays out 27.3% of its earnings in the form of a dividend.

Volatility and Risk

Sixth Street Specialty Lending has a beta of 0.84, suggesting that its share price is 16% less volatile than the S&P 500. Comparatively, Medallion Financial has a beta of 1.33, suggesting that its share price is 33% more volatile than the S&P 500.

Earnings & Valuation

This table compares Sixth Street Specialty Lending and Medallion Financial”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Sixth Street Specialty Lending	$482.53 million	4.67	$220.02 million	$1.89	12.65
Medallion Financial	$224.21 million	1.05	$35.88 million	$1.76	5.76

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

Profitability

This table compares Sixth Street Specialty Lending and Medallion Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Sixth Street Specialty Lending	39.56%	13.47%	6.17%
Medallion Financial	12.62%	9.51%	1.46%

Summary

Sixth Street Specialty Lending beats Medallion Financial on 12 of the 16 factors compared between the two stocks.

About Sixth Street Specialty Lending

Sixth Street Specialty Lending, Inc. (NYSE: TSLX) is a business development company. The fund provides senior secured loans (first-lien, second-lien, and unitranche), unsecured loans, mezzanine debt, and investments in corporate bonds and equity securities and structured products, non-control structured equity, and common equity with a focus on co-investments for organic growth, acquisitions, market or product expansion, restructuring initiatives, recapitalizations, and refinancing. The fund invests in business services, software & technology, healthcare, energy, consumer & retail, manufacturing, industrials, royalty related businesses, education, and specialty finance. It seeks to finance and lending to middle market companies principally located in the United States. The fund invests in companies with enterprise value between $50 million and $1 billion or more and EBITDA between $10 million and $250 million. The transaction size is between $15 million and $350 million. The fund invests across the spectrum of the capital structure and can arrange syndicated transactions of up to $500 million and hold sizeable positions within its credits.

About Medallion Financial

Medallion Financial Corp., together with its subsidiaries, operates as a specialty finance company in the United States. It operates in four segments: Recreation Lending, Home Improvement Lending, Commercial Lending, and Taxi Medallion Lending. The company offers loans that finance consumer purchases of recreational vehicles, boats, and other consumer recreational equipment; consumer financing for window, siding, and roof replacement, swimming pool installations, and other home improvement projects; senior and subordinated loans for the purchase of equipment and related assets necessary to open a new business, or purchase or improvement of an existing business; and taxi medallion loans to individuals and small to mid-size businesses. It also provides debt, mezzanine, and equity investment capital to companies in various commercial industries; and raises deposits and conducts other banking activities. Medallion Financial Corp. was incorporated in 1995 and is headquartered in New York City, New York.