Head to Head Contrast: FS Investment (FSIC) & OFS Capital (OFS)

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

Profitability

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

Net Margins Return on Equity Return on Assets
OFS Capital 23.66% 8.89% 4.63%
FS Investment 43.40% 8.87% 4.90%

Valuation and Earnings

This table compares OFS Capital and FS Investment’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
OFS Capital $33.43 million 4.58 $7.90 million $0.73 15.73
FS Investment $419.31 million 4.13 $181.98 million $0.75 9.40

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

Dividends

OFS Capital pays an annual dividend of $1.36 per share and has a dividend yield of 11.8%. FS Investment pays an annual dividend of $0.76 per share and has a dividend yield of 10.8%. OFS Capital pays out 186.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. FS Investment pays out 101.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. FS Investment has raised its dividend for 2 consecutive years.

Analyst Recommendations

This is a summary of recent recommendations for OFS Capital and FS Investment, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
OFS Capital 0 1 3 0 2.75
FS Investment 0 1 1 0 2.50

OFS Capital currently has a consensus price target of $14.67, suggesting a potential upside of 27.76%. FS Investment has a consensus price target of $9.50, suggesting a potential upside of 34.75%. Given FS Investment’s higher probable upside, analysts plainly believe FS Investment is more favorable than OFS Capital.

Risk & Volatility

OFS Capital has a beta of 0.44, suggesting that its share price is 56% less volatile than the S&P 500. Comparatively, FS Investment has a beta of 0.96, suggesting that its share price is 4% less volatile than the S&P 500.

Institutional & Insider Ownership

26.8% of OFS Capital shares are owned by institutional investors. Comparatively, 33.4% of FS Investment shares are owned by institutional investors. 0.0% of OFS Capital shares are owned by insiders. Comparatively, 1.1% of FS Investment shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Summary

FS Investment beats OFS Capital on 11 of the 17 factors compared between the two stocks.

OFS Capital Company Profile

OFS Capital Corporation (OFS Capital) is an externally managed, closed-end, non-diversified management investment company. The Company’s investment objective is to provide its shareholders with both current income and capital appreciation primarily through debt investments and equity investments. It focuses primarily on middle-market companies in the United States, including senior secured loans, including first-lien, second-lien and unitranche loans, as well as subordinated loans, and warrants and other minority equity securities. The Company may make investments directly or through OFS SBIC I, LP (SBIC I LP), its investment company subsidiary. It focuses on investments in loans, in which OFS Advisor’s investment professionals have expertise, including investments in first-lien, unitranche, second-lien, and mezzanine loans and, to a lesser extent, on warrants and other equity securities. The Company’s investment activities are managed by OFS Capital Management, LLC (OFS Advisor).

FS Investment Company Profile

FS Investment Corporation is an externally managed, non-diversified, closed-end management investment company. The Company’s investment objectives are to generate current income and long-term capital appreciation. Its portfolio consists primarily of investments in senior secured loans and second lien secured loans of the private United States middle market companies and subordinated loans of the private United States companies. It may purchase interests in loans or make other debt investments, including investments in senior secured bonds, through secondary market transactions in the over-the-counter market or directly from target companies as primary market or directly originated investments. It invests in a range of industries, including capital goods; consumer services; consumer durables and apparel; materials; commercial and professional services, and diversified financials. Its investment advisor is FB Income Advisor, LLC.

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