Pennantpark Floating Rate Capital (NASDAQ: PFLT) and TPG Specialty Lending (NYSE:TSLX) are both small-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, valuation, institutional ownership, risk, profitability, dividends and analyst recommendations.
Earnings & Valuation
This table compares Pennantpark Floating Rate Capital and TPG Specialty Lending’s top-line revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Pennantpark Floating Rate Capital||$59.50 million||8.56||$36.32 million||$0.92||14.28|
|TPG Specialty Lending||$210.90 million||5.01||$120.25 million||$1.85||9.46|
This table compares Pennantpark Floating Rate Capital and TPG Specialty Lending’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Pennantpark Floating Rate Capital||47.64%||7.49%||4.48%|
|TPG Specialty Lending||53.80%||12.45%||7.40%|
Pennantpark Floating Rate Capital pays an annual dividend of $1.14 per share and has a dividend yield of 8.7%. TPG Specialty Lending pays an annual dividend of $1.56 per share and has a dividend yield of 8.9%. Pennantpark Floating Rate Capital pays out 123.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. TPG Specialty Lending pays out 84.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. TPG Specialty Lending is clearly the better dividend stock, given its higher yield and lower payout ratio.
Insider and Institutional Ownership
31.6% of Pennantpark Floating Rate Capital shares are held by institutional investors. Comparatively, 62.8% of TPG Specialty Lending shares are held by institutional investors. 1.0% of Pennantpark Floating Rate Capital shares are held by insiders. Comparatively, 4.8% of TPG Specialty Lending shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.
Volatility & Risk
Pennantpark Floating Rate Capital has a beta of 0.6, indicating that its stock price is 40% less volatile than the S&P 500. Comparatively, TPG Specialty Lending has a beta of 0.63, indicating that its stock price is 37% less volatile than the S&P 500.
This is a breakdown of recent recommendations for Pennantpark Floating Rate Capital and TPG Specialty Lending, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Pennantpark Floating Rate Capital||0||0||3||0||3.00|
|TPG Specialty Lending||0||0||4||0||3.00|
Pennantpark Floating Rate Capital currently has a consensus target price of $14.58, indicating a potential upside of 10.98%. TPG Specialty Lending has a consensus target price of $21.17, indicating a potential upside of 20.95%. Given TPG Specialty Lending’s higher possible upside, analysts plainly believe TPG Specialty Lending is more favorable than Pennantpark Floating Rate Capital.
TPG Specialty Lending beats Pennantpark Floating Rate Capital on 13 of the 15 factors compared between the two stocks.
About Pennantpark Floating Rate Capital
PennantPark Floating Rate Capital Ltd. is a business development company. The Company is a closed-end, externally managed and non-diversified investment company. Its investment objectives are to generate current income and capital appreciation by investing primarily in floating rate loans and other investments made to the United States middle-market companies. It provides first lien secured debt and other opportunistic financings (senior notes, second lien, mezzanine, private high yield debt, and preferred and common stock) to middle market sponsors and companies. Its investments may include equity features, such as direct investments in the equity securities of borrowers or warrants or options to buy a minority interest in a portfolio company. It has investments in various sectors, including aerospace and defense; consumer services; healthcare and pharmaceuticals, and others. Its investment activities are managed by the investment advisor, PennantPark Investment Advisers, LLC.
About TPG Specialty Lending
TPG Specialty Lending, Inc. is an externally managed, closed-end, non-diversified management investment company. The Company is a specialty finance company focused on lending to middle-market companies. It seeks to generate current income primarily in the United States-domiciled middle-market companies through direct originations of senior secured loans and originations of mezzanine and unsecured loans and investments in corporate bonds and equity securities. The Company invests in first-lien debt, second-lien debt, mezzanine and unsecured debt and equity and other investments. Its first-lien debt may include standalone first-lien loans; last out first-lien loans; unitranche loans and secured corporate bonds. Its second-lien debt may include secured loans and secured corporate bonds, with a secondary priority behind first-lien debt. As of December 31, 2016, the Company’s portfolio was invested across 19 different industries. The Company’s investment advisor is TSL Advisers, LLC.
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