OFS Capital (NASDAQ:OFS – Get Free Report) and Oxford Square Capital (NASDAQ:OXSQ – Get Free Report) are both small-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their analyst recommendations, institutional ownership, profitability, earnings, dividends, risk and valuation.
Risk & Volatility
OFS Capital has a beta of 0.86, meaning that its share price is 14% less volatile than the S&P 500. Comparatively, Oxford Square Capital has a beta of 0.39, meaning that its share price is 61% less volatile than the S&P 500.
Profitability
This table compares OFS Capital and Oxford Square Capital’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| OFS Capital | -95.15% | 8.74% | 3.13% |
| Oxford Square Capital | -92.37% | 14.11% | 7.02% |
Valuation and Earnings
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| OFS Capital | -$32.12 million | -1.69 | -$33.09 million | ($2.79) | -1.45 |
| Oxford Square Capital | $40.34 million | 3.11 | -$18.73 million | ($0.43) | -3.12 |
Oxford Square Capital has higher revenue and earnings than OFS Capital. Oxford Square Capital is trading at a lower price-to-earnings ratio than OFS Capital, indicating that it is currently the more affordable of the two stocks.
Analyst Recommendations
This is a breakdown of recent ratings for OFS Capital and Oxford Square Capital, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| OFS Capital | 1 | 1 | 0 | 0 | 1.50 |
| Oxford Square Capital | 1 | 0 | 0 | 0 | 1.00 |
OFS Capital presently has a consensus price target of $7.00, suggesting a potential upside of 72.84%. Given OFS Capital’s stronger consensus rating and higher probable upside, analysts plainly believe OFS Capital is more favorable than Oxford Square Capital.
Dividends
OFS Capital pays an annual dividend of $0.68 per share and has a dividend yield of 16.8%. Oxford Square Capital pays an annual dividend of $0.42 per share and has a dividend yield of 31.3%. OFS Capital pays out -24.4% of its earnings in the form of a dividend. Oxford Square Capital pays out -97.7% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. OFS Capital has increased its dividend for 3 consecutive years. Oxford Square Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.
Insider & Institutional Ownership
10.8% of OFS Capital shares are held by institutional investors. Comparatively, 6.4% of Oxford Square Capital shares are held by institutional investors. 0.5% of OFS Capital shares are held by insiders. Comparatively, 8.6% of Oxford Square Capital shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.
Summary
Oxford Square Capital beats OFS Capital on 10 of the 16 factors compared between the two stocks.
About OFS Capital
OFS Capital Corporation is a business development company specializing in direct and fund investments as well as add-on acquisitions. It provides flexible capital solutions primarily through debt capital and to a lesser extent, minority equity investments serving the needs of U.S.-based middle-market companies across a broad array of industries. It does not invest in operational turnarounds or start-up businesses. For direct, it specializes in debt and structured equity investments, recapitalizations and refinancing, management and leveraged buyouts, acquisition financings, ownership transition, shareholder liquidity events, growth capital, independent sponsor transactions, ESOPs, and minority investments in the lower middle market companies. It invests in the aerospace and defense, business services, consumer products and services, construction & building, durable goods, capital equipment, automotive, food and beverage, healthcare & pharmaceutical, specialty chemicals, transportation cargo and logistics, value added distribution, franchising, and industrial and niche manufacturing sectors. The firm invests in companies based in United States. It seeks to invest between $3 million and $35 million, revenues between $15 million and $300 million, annual EBITDA between $5 million and $50 million, and Enterprise value between $10 million and $500 million. The firm seeks to invest in companies with debt investment values between $5 million and $25 million. The fund uses senior secured, unitranche loans, first-lien, second lien, subordinated/ mezzanine loans, warrants, and preferred equity securities and common equity securities. It prefers to take a minority as well as majority stake in the investments made. It also co-invests with its partners for additional capital.
About Oxford Square Capital
Oxford Square Capital Corp. is a business development company, operates as a closed-end, non-diversified management investment company. It is a private equity and mezzanine firm. The firm invests in both public and private companies. It invests in secured and unsecured senior debt, subordinated debt, junior subordinated debt, preferred stock, common stock and syndicated bank loans. The firm primarily invests in debt and/or equity securities of technology-related companies that operate in the computer software, Internet, information technology infrastructure and services, media, telecommunications and telecommunications equipment, semiconductors, hardware, technology-enabled services, semiconductor capital equipment, medical device technology, diversified technology, and networking systems sectors. It concentrates its investments in companies having annual revenues of less than $200 million and a market capitalization or enterprise value of less than $300 million. The firm invests between $5 million and $30 million per transaction. It seeks to exit its investments within 7 years. It serves as the investment adviser to TICC. Oxford Square Capital Corp., formerly known as TICC Capital Corp., was founded in 2003 and is headquartered in Greenwich, Connecticut.
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