Saratoga Investment (NYSE:SAR) & Runway Growth Finance (NASDAQ:RWAY) Financial Contrast

Saratoga Investment (NYSE:SAR) and Runway Growth Finance (NASDAQ:RWAY) are both small-cap finance companies, but which is the better business? We will compare the two companies based on the strength of their institutional ownership, profitability, risk, earnings, analyst recommendations, dividends and valuation.

Dividends

Saratoga Investment pays an annual dividend of $3.00 per share and has a dividend yield of 13.6%. Runway Growth Finance pays an annual dividend of $1.32 per share and has a dividend yield of 19.9%. 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. Runway Growth Finance pays out 143.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Risk & Volatility

Saratoga Investment has a beta of 0.55, indicating that its share price is 45% less volatile than the S&P 500. Comparatively, Runway Growth Finance has a beta of 0.7, indicating that its share price is 30% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Saratoga Investment and Runway Growth Finance, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Saratoga Investment	0	6	0	0	2.00
Runway Growth Finance	0	4	3	0	2.43

Saratoga Investment currently has a consensus target price of $23.63, suggesting a potential upside of 6.79%. Runway Growth Finance has a consensus target price of $10.50, suggesting a potential upside of 58.37%. Given Runway Growth Finance’s stronger consensus rating and higher possible upside, analysts plainly believe Runway Growth Finance is more favorable than Saratoga Investment.

Insider & Institutional Ownership

19.1% of Saratoga Investment shares are owned by institutional investors. Comparatively, 64.6% of Runway Growth Finance shares are owned by institutional investors. 10.0% of Saratoga Investment shares are owned by company insiders. Comparatively, 1.0% of Runway Growth Finance shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares Saratoga Investment and Runway Growth 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%
Runway Growth Finance	24.79%	11.52%	5.69%

Earnings and Valuation

This table compares Saratoga Investment and Runway Growth Finance”s revenue, earnings per share 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
Runway Growth Finance	$137.33 million	1.74	$34.05 million	$0.92	7.21

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

Summary

Runway Growth Finance beats Saratoga Investment on 9 of the 16 factors compared between the two stocks.

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 Runway Growth Finance

Runway Growth Finance Corp. is a business development company specializing investments in senior-secured loans to late stage and growth companies. It prefers to make investments in companies engaged in the technology, life sciences, healthcare and information services, business services and select consumer services and products sectors. It prefers to investments in companies engaged in electronic equipment and instruments, systems software, hardware, storage and peripherals and specialized consumer services, application software, healthcare technology, internet software and services, data processing and outsourced services, internet retail, human resources and employment services, biotechnology, healthcare equipment and education services. It invests in senior secured loans between $10 million and $75 million.