Great Elm Capital (NASDAQ:GECC) and PennantPark Investment (PNNT) Head-To-Head Analysis

PennantPark Investment (NASDAQ: PNNT) and Great Elm Capital (NASDAQ:GECC) are both small-cap finance companies, but which is the better business? We will contrast the two businesses based on the strength of their dividends, analyst recommendations, earnings, institutional ownership, risk, profitability and valuation.

Profitability

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This table compares PennantPark Investment and Great Elm Capital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
PennantPark Investment 41.17% 8.58% 4.54%
Great Elm Capital -9.26% 11.93% 7.83%

Risk and Volatility

PennantPark Investment has a beta of 1.13, suggesting that its share price is 13% more volatile than the S&P 500. Comparatively, Great Elm Capital has a beta of 0.51, suggesting that its share price is 49% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of current recommendations and price targets for PennantPark Investment and Great Elm Capital, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
PennantPark Investment 0 3 3 0 2.50
Great Elm Capital 0 2 2 0 2.50

PennantPark Investment currently has a consensus target price of $8.30, indicating a potential upside of 20.46%. Great Elm Capital has a consensus target price of $13.33, indicating a potential upside of 42.30%. Given Great Elm Capital’s higher possible upside, analysts clearly believe Great Elm Capital is more favorable than PennantPark Investment.

Valuation & Earnings

This table compares PennantPark Investment and Great Elm Capital’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
PennantPark Investment $124.53 million 3.93 $61.71 million $0.79 8.72
Great Elm Capital $29.73 million 3.36 -$2.75 million $1.52 6.16

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

Institutional and Insider Ownership

42.9% of PennantPark Investment shares are owned by institutional investors. Comparatively, 8.1% of Great Elm Capital shares are owned by institutional investors. 2.0% of PennantPark Investment shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Dividends

PennantPark Investment pays an annual dividend of $0.72 per share and has a dividend yield of 10.4%. Great Elm Capital pays an annual dividend of $1.00 per share and has a dividend yield of 10.7%. PennantPark Investment pays out 91.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Great Elm Capital pays out 65.8% of its earnings in the form of a dividend. Great Elm Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

PennantPark Investment beats Great Elm Capital on 9 of the 15 factors compared between the two stocks.

PennantPark Investment Company Profile

PennantPark Investment Corporation is a closed-end, non-diversified investment company. The Company is a business development company. Its objectives are to generate both current income and capital appreciation while seeking to preserve capital through debt and equity investments primarily made to the United States middle-market companies in the form of senior secured debt, mezzanine debt and equity investments. The Company’s debt investments may generally range in maturity from 3 to 10 years and, are made to the United States and to a limited extent, non-United States corporations, partnerships and other business entities, which operate in various industries and geographical regions. In addition, it may invest up to approximately 30% of its portfolio in non-qualifying assets. It invests in sectors, such as aerospace and defense; energy/utilities; auto sector; environmental services, and beverage, among others. PennantPark Investment Advisers, LLC is the Company’s investment advisor.

Great Elm Capital Company Profile

Great Elm Capital Corp. is a closed-end, non-diversified management investment company. The Company is focused on generating interest and capital appreciation by investing in the capital structures of middle-market companies that operate in a range of industries. The Company also focuses on making multi-year investments, primarily in secured and senior unsecured debt instruments that it purchases in the secondary markets, though it may also originate investments or acquire them directly from issuers. The Company’s investment advisor is Great Elm Capital Management, Inc. (GECM). Great Elm Capital Group is the parent company of GECM.

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