Head to Head Comparison: Investcorp Credit Management BDC (NASDAQ:ICMB) and Saratoga Investment (NYSE:SAR)

Investcorp Credit Management BDC (NASDAQ:ICMB) and Saratoga Investment (NYSE:SAR) are both small-cap finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their earnings, analyst recommendations, institutional ownership, dividends, risk, valuation and profitability.

Institutional and Insider Ownership

7.8% of Investcorp Credit Management BDC shares are owned by institutional investors. Comparatively, 19.1% of Saratoga Investment shares are owned by institutional investors. 1.3% of Investcorp Credit Management BDC shares are owned by company insiders. Comparatively, 10.0% of Saratoga Investment shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Dividends

Investcorp Credit Management BDC pays an annual dividend of $0.48 per share and has a dividend yield of 40.7%. Saratoga Investment pays an annual dividend of $3.00 per share and has a dividend yield of 13.2%. Investcorp Credit Management BDC pays out -35.0% of its earnings in the form of a dividend. Saratoga Investment pays out 128.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Investcorp Credit Management BDC has raised its dividend for 1 consecutive years. Investcorp Credit Management BDC is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

Investcorp Credit Management BDC has a beta of 0.67, suggesting that its stock price is 33% less volatile than the S&P 500. Comparatively, Saratoga Investment has a beta of 0.56, suggesting that its stock price is 44% less volatile than the S&P 500.

Profitability

This table compares Investcorp Credit Management BDC and Saratoga Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Investcorp Credit Management BDC	-118.71%	2.26%	0.75%
Saratoga Investment	29.12%	9.29%	3.17%

Valuation and Earnings

This table compares Investcorp Credit Management BDC and Saratoga Investment”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Investcorp Credit Management BDC	-$15.41 million	-1.11	-$8.85 million	($1.37)	-0.86
Saratoga Investment	$49.92 million	7.40	$36.60 million	$2.33	9.75

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

Analyst Ratings

This is a summary of current recommendations for Investcorp Credit Management BDC and Saratoga Investment, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Investcorp Credit Management BDC	1	0	0	0	1.00
Saratoga Investment	0	6	0	0	2.00

Saratoga Investment has a consensus target price of $23.63, suggesting a potential upside of 4.02%. Given Saratoga Investment’s stronger consensus rating and higher possible upside, analysts clearly believe Saratoga Investment is more favorable than Investcorp Credit Management BDC.

Summary

Saratoga Investment beats Investcorp Credit Management BDC on 12 of the 16 factors compared between the two stocks.

About Investcorp Credit Management BDC

Investcorp Credit Management BDC, Inc. is a business development company specializing in loan, mezzanine, middle market, growth capital, acquisitions, market/product expansion, organic growth, refinancings and recapitalization investments. It also selectively invests in mezzanine loans/structured equity and in the equity of portfolio companies through warrants and other instruments, in most cases taking such upside participation interests as part of a broader investment relationship. The fund typically invests in United States and Europe. Within United States, the fund seeks to invest in Midatlantic, Midwest, Northeast, Southeast, and West Coast regions. The fund primarily invests in cable and satellites; consumer services; healthcare equipment and services; industrials; information technology; telecommunication services; and utilities sectors. The fund seeks to invest between $5 million to $25 million in companies that have annual revenues of at least $50 million with EBITDA at least $15 million.

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.