Critical Analysis: Great Elm Capital Group (NASDAQ:GECC) versus Sprott (NYSE:SII)

Great Elm Capital Group (NASDAQ:GECC) and Sprott (NYSE:SII) are both finance companies, but which is the better business? We will contrast the two companies based on the strength of their institutional ownership, dividends, valuation, earnings, risk, analyst recommendations and profitability.

Institutional and Insider Ownership

38.8% of Great Elm Capital Group shares are owned by institutional investors. Comparatively, 28.3% of Sprott shares are owned by institutional investors. 8.7% of Great Elm Capital Group shares are owned by insiders. Comparatively, 18.3% of Sprott shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Volatility & Risk

Great Elm Capital Group has a beta of 0.62, meaning that its share price is 38% less volatile than the S&P 500. Comparatively, Sprott has a beta of 1.02, meaning that its share price is 2% more volatile than the S&P 500.

Earnings and Valuation

This table compares Great Elm Capital Group and Sprott”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Great Elm Capital Group	$39.32 million	2.42	$3.55 million	($0.56)	-12.13
Sprott	$178.65 million	17.86	$49.29 million	$1.95	63.46

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Great Elm Capital Group	-17.08%	10.97%	3.95%
Sprott	23.26%	15.01%	11.97%

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Great Elm Capital Group and Sprott, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Great Elm Capital Group	1	2	0	0	1.67
Sprott	0	2	2	0	2.50

Great Elm Capital Group currently has a consensus price target of $10.50, suggesting a potential upside of 54.64%. Sprott has a consensus price target of $132.00, suggesting a potential upside of 6.67%. Given Great Elm Capital Group’s higher probable upside, analysts plainly believe Great Elm Capital Group is more favorable than Sprott.

Dividends

Great Elm Capital Group pays an annual dividend of $1.48 per share and has a dividend yield of 21.8%. Sprott pays an annual dividend of $1.60 per share and has a dividend yield of 1.3%. Great Elm Capital Group pays out -264.3% of its earnings in the form of a dividend. Sprott pays out 82.1% 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 Group has increased its dividend for 2 consecutive years and Sprott has increased its dividend for 1 consecutive years. Great Elm Capital Group is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Sprott beats Great Elm Capital Group on 12 of the 17 factors compared between the two stocks.

About Great Elm Capital Group

Great Elm Capital Corp. is a business development company which specializes in loan and mezzanine, middle market investments. It invests in the debt instruments of middle market companies. The fund prefers to invest in media, commercial services and supplies, healthcare, telecommunication services, communications equipment. It typically makes equity investments between $3 million and $10 million in companies with revenues between $3 million and $75 million.

About Sprott

Sprott Inc. is a publicly owned asset management holding company. Through its subsidiaries, the firm provides asset management, portfolio management, wealth management, fund management, and administrative and consulting services to its clients. It offers mutual funds, hedge funds, and offshore funds, along with managed accounts. Further, the firm also provides broker-dealer activities. Sprott Inc. was formed on February 13, 2008 and is based in Toronto, Canada.