Critical Comparison: PhenixFIN (NYSE:PFX) & Saratoga Investment (NYSE:SAR)

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

Analyst Recommendations

This is a summary of recent ratings and price targets for Saratoga Investment and PhenixFIN, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Saratoga Investment	1	4	0	0	1.80
PhenixFIN	0	1	0	0	2.00

Saratoga Investment presently has a consensus price target of $19.67, indicating a potential upside of 60.43%. Given Saratoga Investment’s higher possible upside, research analysts clearly believe Saratoga Investment is more favorable than PhenixFIN.

Risk & Volatility

Saratoga Investment has a beta of 0.62, indicating that its share price is 38% less volatile than the S&P 500. Comparatively, PhenixFIN has a beta of 0.34, indicating that its share price is 66% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Saratoga Investment	-3.35%	8.66%	2.78%
PhenixFIN	72.98%	2.95%	1.68%

Earnings & Valuation

This table compares Saratoga Investment and PhenixFIN”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	$125.71 million	1.52	$36.60 million	($0.25)	-49.04
PhenixFIN	$14.16 million	5.51	$18.62 million	$2.41	16.76

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

Institutional and Insider Ownership

19.1% of Saratoga Investment shares are owned by institutional investors. Comparatively, 43.3% of PhenixFIN shares are owned by institutional investors. 10.6% of Saratoga Investment shares are owned by insiders. Comparatively, 25.2% of PhenixFIN shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments 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 24.5%. PhenixFIN pays an annual dividend of $0.48 per share and has a dividend yield of 1.2%. Saratoga Investment pays out -1,200.0% of its earnings in the form of a dividend. PhenixFIN pays out 19.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Saratoga Investment is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Saratoga Investment beats PhenixFIN on 8 of the 15 factors compared between the two stocks.

About Saratoga Investment

Saratoga Investment Corp. is a business development company (BDC) that provides financing to lower middle-market businesses in the United States. It is externally managed by Saratoga Investment Advisors LLC. The company invests primarily in debt securities, including senior and subordinated loans, and may also make equity investments. Its financing can support business growth, acquisitions, and other corporate needs. Saratoga Investment was formed in 2007 and is led by Chairman and Chief Executive Officer Christian L. Oberbeck.

About PhenixFIN

PhenixFIN Corporation is a closed-end investment company that has elected to be regulated as a business development company under the Investment Company Act of 1940. Through its investment activities, the company seeks to provide financing to privately held, middle-market businesses, primarily in the United States. PhenixFIN generally invests in privately negotiated debt and equity securities. Its portfolio may include secured and unsecured loans, subordinated debt, and equity or equity-related investments.