Runway Growth Finance (NASDAQ:RWAY – Get Free Report) and WhiteHorse Finance (NASDAQ:WHF – Get Free Report) are both small-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, dividends, earnings, risk, institutional ownership, profitability and analyst recommendations.
Volatility & Risk
Runway Growth Finance has a beta of 0.64, indicating that its stock price is 36% less volatile than the S&P 500. Comparatively, WhiteHorse Finance has a beta of 0.41, indicating that its stock price is 59% less volatile than the S&P 500.
Valuation and Earnings
This table compares Runway Growth Finance and WhiteHorse Finance”s gross revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Runway Growth Finance | $12.51 million | 22.61 | $34.05 million | ($0.09) | -74.00 |
| WhiteHorse Finance | $72.67 million | 2.16 | $14.34 million | $0.41 | 17.71 |
Runway Growth Finance has higher earnings, but lower revenue than WhiteHorse Finance. Runway Growth Finance is trading at a lower price-to-earnings ratio than WhiteHorse Finance, indicating that it is currently the more affordable of the two stocks.
Profitability
This table compares Runway Growth Finance and WhiteHorse Finance’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Runway Growth Finance | -2.00% | 10.87% | 5.37% |
| WhiteHorse Finance | 13.46% | 9.47% | 3.95% |
Insider and Institutional Ownership
64.6% of Runway Growth Finance shares are held by institutional investors. Comparatively, 13.2% of WhiteHorse Finance shares are held by institutional investors. 1.0% of Runway Growth Finance shares are held by company insiders. Comparatively, 2.5% of WhiteHorse Finance shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.
Analyst Ratings
This is a summary of recent ratings and target prices for Runway Growth Finance and WhiteHorse Finance, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Runway Growth Finance | 1 | 4 | 2 | 0 | 2.14 |
| WhiteHorse Finance | 2 | 3 | 0 | 0 | 1.60 |
Runway Growth Finance presently has a consensus price target of $9.00, indicating a potential upside of 35.14%. WhiteHorse Finance has a consensus price target of $7.75, indicating a potential upside of 6.75%. Given Runway Growth Finance’s stronger consensus rating and higher possible upside, research analysts clearly believe Runway Growth Finance is more favorable than WhiteHorse Finance.
Dividends
Runway Growth Finance pays an annual dividend of $1.32 per share and has a dividend yield of 19.8%. WhiteHorse Finance pays an annual dividend of $1.00 per share and has a dividend yield of 13.8%. Runway Growth Finance pays out -1,466.7% of its earnings in the form of a dividend. WhiteHorse Finance pays out 243.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. WhiteHorse Finance has raised its dividend for 3 consecutive years. Runway Growth Finance is clearly the better dividend stock, given its higher yield and lower payout ratio.
Summary
Runway Growth Finance beats WhiteHorse Finance on 11 of the 17 factors compared between the two stocks.
About Runway Growth Finance
Runway Growth Finance Corp. is a business development company specializing investments in senior-secured loans to late stage and growth companies. It prefers to make investments in companies engaged in the technology, life sciences, healthcare and information services, business services and select consumer services and products sectors. It prefers to investments in companies engaged in electronic equipment and instruments, systems software, hardware, storage and peripherals and specialized consumer services, application software, healthcare technology, internet software and services, data processing and outsourced services, internet retail, human resources and employment services, biotechnology, healthcare equipment and education services. It invests in senior secured loans between $10 million and $75 million.
About WhiteHorse Finance
WhiteHorse Finance, Inc. is business development company, non-diversified, closed end management company specializing in originating senior secured loans, lower middle market, growth capital industries. It invests in broadline retail, office services and supplies, building products, health care services, health care supplies, research and consulting services, application software, home furnishings, specialized consumer services, data processing and outsourced services, leisure facilities, cable, and satellite. It prefers to invest in United States. It typically invests between $5 million to $25 million in companies having enterprise value of between $50 million and $350 million.
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