Head-To-Head Analysis: Bain Capital Specialty Finance (NYSE:BCSF) & FS KKR Capital (NYSE:FSK)

Bain Capital Specialty Finance (NYSE:BCSF) and FS KKR Capital (NYSE:FSK) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, analyst recommendations, earnings, valuation, risk, profitability and dividends.

Volatility and Risk

Bain Capital Specialty Finance has a beta of 0.59, meaning that its share price is 41% less volatile than the S&P 500. Comparatively, FS KKR Capital has a beta of 0.85, meaning that its share price is 15% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Bain Capital Specialty Finance and FS KKR Capital, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Bain Capital Specialty Finance	0	2	1	0	2.33
FS KKR Capital	1	7	0	0	1.88

Bain Capital Specialty Finance presently has a consensus price target of $14.00, indicating a potential upside of 4.43%. FS KKR Capital has a consensus price target of $10.58, indicating a potential downside of 2.39%. Given Bain Capital Specialty Finance’s stronger consensus rating and higher probable upside, equities analysts plainly believe Bain Capital Specialty Finance is more favorable than FS KKR Capital.

Earnings and Valuation

This table compares Bain Capital Specialty Finance and FS KKR Capital”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Bain Capital Specialty Finance	$273.24 million	3.18	$98.76 million	$1.14	11.76
FS KKR Capital	$1.52 billion	2.00	$11.00 million	($1.97)	-5.50

Bain Capital Specialty Finance has higher earnings, but lower revenue than FS KKR Capital. FS KKR Capital is trading at a lower price-to-earnings ratio than Bain Capital Specialty Finance, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Bain Capital Specialty Finance and FS KKR Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Bain Capital Specialty Finance	27.00%	10.44%	4.35%
FS KKR Capital	-38.65%	4.34%	1.85%

Dividends

Bain Capital Specialty Finance pays an annual dividend of $1.68 per share and has a dividend yield of 12.5%. FS KKR Capital pays an annual dividend of $1.80 per share and has a dividend yield of 16.6%. Bain Capital Specialty Finance pays out 147.4% 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 KKR Capital pays out -91.4% of its earnings in the form of a dividend. Bain Capital Specialty Finance has raised its dividend for 4 consecutive years. FS KKR Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider and Institutional Ownership

36.3% of FS KKR Capital shares are held by institutional investors. 0.6% of Bain Capital Specialty Finance shares are held by company insiders. Comparatively, 0.2% of FS KKR Capital shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Summary

Bain Capital Specialty Finance beats FS KKR Capital on 12 of the 17 factors compared between the two stocks.

About Bain Capital Specialty Finance

Bain Capital Specialty Finance, Inc. is business development company specializing in direct loans to middle-market companies. The fund seeks to invest in senior investments with a first or second lien on collateral, senior first lien, stretch senior, senior second lien, unitranche, mezzanine debt, junior securities, other junior investments, and secondary purchases of assets or portfolios that primarily consist of middle-market corporate debt. It typically invests in companies with EBITDA between $10 million and $150 million.

About FS KKR Capital

FS KKR Capital Corp. is a business development company specializing in investments in debt securities. It provides customized credit solutions to private middle market U.S. companies. It invest primarily in the senior secured debt and, to a lesser extent, the subordinated debt of private middle market U.S. companies. It seeks to purchase interests in loans through secondary market transactions or directly from the target companies as primary market investments. It also seeks to invest in first lien senior secured loans, second lien secured loans and, to a lesser extent, subordinated loans, or mezzanine loans. In connection with the debt investments, the firm also receives equity interests such as warrants or options as additional consideration. It also seek to purchase minority interests in the form of common or preferred equity in our target companies, either in conjunction with one of the debt investments or through a co-investment with a financial sponsor. Additionally, on an opportunistic basis, the fund may also invest in corporate bonds and similar debt securities. The fund does not seek to invest in start-up companies, turnaround situations, or companies with speculative business plans. It seeks to invest in small and middle-market companies based in United States. The fund seeks to invest in firms with annual revenue between $10 million to $2.5 billion. It focus on providing customized one-stop credit solutions to private upper middle market companies with annual EBITDA of $50 million to $100 million at the time of investment. It seeks to exit from securities by selling them in a privately negotiated over- the- counter market. For any investments that are not able to be sold within the secondary market, the firm seeks to exit such investments through repayment, an initial public offering of equity securities, merger, sale or recapitalization.