Saratoga Investment (NYSE:SAR – Get Free Report) and PhenixFIN (NYSE:PFX – Get Free Report) are both small-cap finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their institutional ownership, valuation, analyst recommendations, earnings, profitability, risk and dividends.
Insider & Institutional Ownership
19.1% of Saratoga Investment shares are held by institutional investors. Comparatively, 43.3% of PhenixFIN shares are held by institutional investors. 10.6% of Saratoga Investment shares are held by company insiders. Comparatively, 25.2% of PhenixFIN shares are held by company 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.
Profitability
This table compares Saratoga Investment and PhenixFIN’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Saratoga Investment | -3.35% | 8.66% | 2.78% |
| PhenixFIN | 72.98% | 2.95% | 1.68% |
Analyst Recommendations
This is a summary of recent ratings and target prices for Saratoga Investment and PhenixFIN, as reported by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Saratoga Investment | 1 | 4 | 0 | 0 | 1.80 |
| PhenixFIN | 0 | 1 | 0 | 0 | 2.00 |
Saratoga Investment presently has a consensus price target of $19.67, indicating a potential upside of 52.72%. Given Saratoga Investment’s higher possible upside, equities research analysts plainly believe Saratoga Investment is more favorable than PhenixFIN.
Risk and Volatility
Saratoga Investment has a beta of 0.62, suggesting that its stock price is 38% less volatile than the S&P 500. Comparatively, PhenixFIN has a beta of 0.32, suggesting that its stock price is 68% less volatile than the S&P 500.
Dividends
Saratoga Investment pays an annual dividend of $3.00 per share and has a dividend yield of 23.3%. PhenixFIN pays an annual dividend of $0.48 per share and has a dividend yield of 1.1%. Saratoga Investment pays out -1,200.0% of its earnings in the form of a dividend. PhenixFIN pays out 19.9% 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. Saratoga Investment is clearly the better dividend stock, given its higher yield and lower payout ratio.
Valuation and Earnings
This table compares Saratoga Investment and PhenixFIN”s gross revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Saratoga Investment | $125.71 million | 1.59 | $36.60 million | ($0.25) | -51.51 |
| PhenixFIN | $14.16 million | 5.79 | $18.62 million | $2.41 | 17.63 |
Saratoga Investment has higher revenue and earnings than PhenixFIN. Saratoga Investment is trading at a lower price-to-earnings ratio than PhenixFIN, indicating that it is currently the more affordable of the two stocks.
Summary
Saratoga Investment beats PhenixFIN on 9 of the 15 factors compared between the two stocks.
About Saratoga Investment
Saratoga Investment Corp. is a business development company specializing in leveraged and management buyouts, acquisition financings, growth financings, recapitalization, debt refinancing, and transitional financing transactions at the lower end of middle market companies. It structures its investments as debt and equity by investing through first and second lien loans, mezzanine debt, co-investments, select high yield bonds, senior secured bonds, unsecured bonds, and preferred and common equity. The firm prefers to invest in aerospace, automotive aftermarket and services, business products and services, consumer products and services, education, environmental services, industrial services, financial services, food and beverage, healthcare products and services, logistics, distribution, manufacturing, restaurants services, food services, software services, technology services, specialty chemical, media and telecommunications. It seeks to invest in the United States. The firm primarily invests $5 million to $50 million in companies having EBITDA of $2 million or greater and revenues of $8 million to $250 million. The firm prefer to take a majority stake. It invests through direct lending as well as participation in loan syndicates. The firm was formerly known as GSC Investment Corp. Saratoga Investment Corp. was formed on 2007 and is based in New York, New York with an additional office in Florham Park, New Jersey.
About PhenixFIN
PhenixFIN Corporation is a business development company. The firm seeks to invest in privately negotiated debt and equity securities of small and middle market companies. It primarily invests in the following sectors: business services; buildings and real estate; automobile; oil and gas; aerospace and defense; home and office furnishings, housewares, and durable consumer products; healthcare, education and childcare; personal, food, and miscellaneous services; retail stores, diversified or conglomerate manufacturing; telecommunications; mining, steel, iron, and non-precious metals; leisure, amusement, motion pictures, and entertainment; chemicals, plastics, and rubber; finance; personal and nondurable consumer products (manufacturing only); beverage, food, and tobacco; containers, packaging, and glass; structure finance securities; machinery (non-agriculture, non-construction, non-electric); diversified or conglomerate service; restaurant and franchise; electronics; and cargo transport. The fund seeks to invest in companies located in North America. The fund targets private debt transactions in companies with enterprise values or asset values between $25 million and $250 million. The fund seeks to invest in companies with debt investment values between $10 million and $50 million. It exits its investments between three years and seven years; it holds most of its investments to maturity or repayment, but may realize or sell some investments earlier. The fund may take a board seat on its investee companies and can also offer managerial assistance to certain portfolio companies. It structures its investments as first lien senior secured loans, second lien senior secured loans, senior secured notes, senior subordinated notes, subordinate notes, unitranche loans, and seeks warrants or other equity participation. The fund may co-invest in privately negotiated transactions under certain conditions. PhenixFIN Corporation was founded in 2010 and is headquartered in New York, New York.
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