Financial Survey: WhiteHorse Finance (NASDAQ:WHF) & Saratoga Investment (NYSE:SAR)

Saratoga Investment (NYSE:SAR) and WhiteHorse Finance (NASDAQ:WHF) are both small-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, dividends, institutional ownership, earnings, analyst recommendations, risk and valuation.

Valuation and Earnings

This table compares Saratoga Investment and WhiteHorse Finance”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Saratoga Investment	$148.85 million	2.40	$28.09 million	$2.44	9.07
WhiteHorse Finance	$20.17 million	7.79	$14.34 million	$0.62	11.40

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

Risk and Volatility

Saratoga Investment has a beta of 0.55, meaning that its stock price is 45% less volatile than the S&P 500. Comparatively, WhiteHorse Finance has a beta of 0.56, meaning that its stock price is 44% less volatile than the S&P 500.

Insider and Institutional Ownership

19.1% of Saratoga Investment shares are owned by institutional investors. Comparatively, 13.2% of WhiteHorse Finance shares are owned by institutional investors. 10.0% of Saratoga Investment shares are owned by insiders. Comparatively, 2.5% of WhiteHorse Finance shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Dividends

Saratoga Investment pays an annual dividend of $3.00 per share and has a dividend yield of 13.6%. WhiteHorse Finance pays an annual dividend of $1.00 per share and has a dividend yield of 14.1%. Saratoga Investment pays out 123.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. WhiteHorse Finance pays out 161.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. WhiteHorse Finance has raised its dividend for 3 consecutive years. WhiteHorse Finance is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Profitability

This table compares Saratoga Investment and WhiteHorse Finance’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Saratoga Investment	30.61%	9.19%	3.09%
WhiteHorse Finance	19.73%	9.66%	4.03%

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Saratoga Investment and WhiteHorse Finance, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Saratoga Investment	0	6	0	0	2.00
WhiteHorse Finance	2	3	0	0	1.60

Saratoga Investment presently has a consensus target price of $23.63, indicating a potential upside of 6.79%. WhiteHorse Finance has a consensus target price of $7.75, indicating a potential upside of 9.62%. Given WhiteHorse Finance’s higher possible upside, analysts plainly believe WhiteHorse Finance is more favorable than Saratoga Investment.

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 WhiteHorse Finance

WhiteHorse Finance, Inc. is business development company, non-diversified, closed end management company specializing in originating senior secured loans, lower middle market, growth capital industries. It invests in broadline retail, office services and supplies, building products, health care services, health care supplies, research and consulting services, application software, home furnishings, specialized consumer services, data processing and outsourced services, leisure facilities, cable, and satellite. It prefers to invest in United States. It typically invests between $5 million to $25 million in companies having enterprise value of between $50 million and $350 million.