Contrasting Fidus Investment (NASDAQ:FDUS) and FS KKR Capital (NYSE:FSK)

Fidus Investment (NASDAQ:FDUS) and FS KKR Capital (NYSE:FSK) are both finance companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, risk, institutional ownership, valuation, analyst recommendations, dividends and profitability.

Dividends

Fidus Investment pays an annual dividend of $1.72 per share and has a dividend yield of 8.1%. FS KKR Capital pays an annual dividend of $2.56 per share and has a dividend yield of 14.2%. Fidus Investment pays out 74.5% of its earnings in the form of a dividend. FS KKR Capital pays out 328.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Institutional & Insider Ownership

28.1% of Fidus Investment shares are owned by institutional investors. Comparatively, 36.3% of FS KKR Capital shares are owned by institutional investors. 0.9% of Fidus Investment shares are owned by company insiders. Comparatively, 0.2% of FS KKR Capital shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Fidus Investment and FS KKR Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Fidus Investment	51.88%	11.52%	6.41%
FS KKR Capital	13.24%	6.24%	2.75%

Valuation and Earnings

This table compares Fidus Investment and FS KKR Capital”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Fidus Investment	$146.15 million	5.16	$78.29 million	$2.31	9.23
FS KKR Capital	$315.00 million	16.07	$585.00 million	$0.78	23.17

FS KKR Capital has higher revenue and earnings than Fidus Investment. Fidus Investment is trading at a lower price-to-earnings ratio than FS KKR Capital, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings for Fidus Investment and FS KKR Capital, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Fidus Investment	0	2	0	1	2.67
FS KKR Capital	2	5	0	0	1.71

Fidus Investment currently has a consensus target price of $22.00, suggesting a potential upside of 3.14%. FS KKR Capital has a consensus target price of $18.9167, suggesting a potential upside of 4.65%. Given FS KKR Capital’s higher probable upside, analysts clearly believe FS KKR Capital is more favorable than Fidus Investment.

Risk and Volatility

Fidus Investment has a beta of 0.95, meaning that its share price is 5% less volatile than the S&P 500. Comparatively, FS KKR Capital has a beta of 0.93, meaning that its share price is 7% less volatile than the S&P 500.

Summary

Fidus Investment beats FS KKR Capital on 9 of the 16 factors compared between the two stocks.

About Fidus Investment

Fidus Investment Corporation is a business development company. It specializing in leveraged buyouts, refinancings, change of ownership transactions, recapitalizations, strategic acquisitions, mezzanine, growth capital, business expansion, lower middle market investments, debt investments, subordinated and second lien loans, senior secured and unitranche debt, preferred equity, warrants, subordinated debt, senior subordinated notes, junior secured loans, and unitranche loans. It does not invest in turnarounds or distressed situations. The fund prefers to invest in aerospace and defense, business services, consumer products and services including retail, food, and beverage, healthcare products and services, industrial products and services, information technology services, niche manufacturing, transportation and logistics, and value-added distribution sectors. It seeks to invest in companies based in United States. The fund typically invests between $5 million and $15 million per transaction in companies with annual revenues between $10 million and $150 million and an annual EBITDA between $3 million and $20 million, but it can occasionally invest in larger or smaller companies. It seeks to acquire minority equity stakes and board observation rights in conjunction with its investments.

About FS KKR Capital

FS KKR Capital Corp. is a business development company specializing in investments in debt securities. It provides customized credit solutions to private middle market U.S. companies. It invest primarily in the senior secured debt and, to a lesser extent, the subordinated debt of private middle market U.S. companies. It seeks to purchase interests in loans through secondary market transactions or directly from the target companies as primary market investments. It also seeks to invest in first lien senior secured loans, second lien secured loans and, to a lesser extent, subordinated loans, or mezzanine loans. In connection with the debt investments, the firm also receives equity interests such as warrants or options as additional consideration. It also seek to purchase minority interests in the form of common or preferred equity in our target companies, either in conjunction with one of the debt investments or through a co-investment with a financial sponsor. Additionally, on an opportunistic basis, the fund may also invest in corporate bonds and similar debt securities. The fund does not seek to invest in start-up companies, turnaround situations, or companies with speculative business plans. It seeks to invest in small and middle-market companies based in United States. The fund seeks to invest in firms with annual revenue between $10 million to $2.5 billion. It focus on providing customized one-stop credit solutions to private upper middle market companies with annual EBITDA of $50 million to $100 million at the time of investment. It seeks to exit from securities by selling them in a privately negotiated over- the- counter market. For any investments that are not able to be sold within the secondary market, the firm seeks to exit such investments through repayment, an initial public offering of equity securities, merger, sale or recapitalization.