Reviewing Stellus Capital Investment (NYSE:SCM) and Main Street Capital (NYSE:MAIN)

Stellus Capital Investment (NYSE:SCMGet Free Report) and Main Street Capital (NYSE:MAINGet Free Report) are both finance companies, but which is the better stock? We will contrast the two companies based on the strength of their analyst recommendations, institutional ownership, valuation, profitability, risk, earnings and dividends.

Dividends

Stellus Capital Investment pays an annual dividend of $1.60 per share and has a dividend yield of 11.1%. Main Street Capital pays an annual dividend of $3.00 per share and has a dividend yield of 4.9%. Stellus Capital Investment pays out 111.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Main Street Capital pays out 50.9% of its earnings in the form of a dividend. Main Street Capital has increased its dividend for 4 consecutive years.

Volatility & Risk

Stellus Capital Investment has a beta of 0.88, indicating that its stock price is 12% less volatile than the S&P 500. Comparatively, Main Street Capital has a beta of 0.82, indicating that its stock price is 18% less volatile than the S&P 500.

Earnings and Valuation

This table compares Stellus Capital Investment and Main Street Capital”s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Stellus Capital Investment $104.74 million 3.90 $45.85 million $1.44 9.98
Main Street Capital $541.03 million 10.01 $508.08 million $5.89 10.33

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

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Stellus Capital Investment and Main Street Capital, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Stellus Capital Investment 0 1 0 0 2.00
Main Street Capital 0 4 1 0 2.20

Stellus Capital Investment currently has a consensus price target of $13.00, suggesting a potential downside of 9.57%. Main Street Capital has a consensus price target of $52.80, suggesting a potential downside of 13.21%. Given Stellus Capital Investment’s higher possible upside, analysts clearly believe Stellus Capital Investment is more favorable than Main Street Capital.

Profitability

This table compares Stellus Capital Investment and Main Street Capital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Stellus Capital Investment 36.35% 11.93% 4.46%
Main Street Capital 94.61% 13.02% 6.95%

Insider & Institutional Ownership

13.2% of Stellus Capital Investment shares are held by institutional investors. Comparatively, 20.3% of Main Street Capital shares are held by institutional investors. 4.0% of Stellus Capital Investment shares are held by company insiders. Comparatively, 4.1% of Main Street Capital shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Summary

Main Street Capital beats Stellus Capital Investment on 14 of the 17 factors compared between the two stocks.

About Stellus Capital Investment

(Get Free Report)

Stellus Capital Investment Corporation is a business development company specializing in investments in private middle-market companies. It invests through first lien, second lien, unitranche, and mezzanine debt financing, often with a corresponding equity investment. The fund prefers to invest in US and Canada. The fund seeks to invest in companies with an EBITDA between $5 million and $50 million.

About Main Street Capital

(Get Free Report)

Main Street Capital Corporation is a business development company specializes in equity capital to lower middle market companies. The firm specializing in recapitalizations, management buyouts, refinancing, family estate planning, management buyouts, refinancing, industry consolidation, mature, later stage emerging growth. The firm also provides debt capital to middle market companies for acquisitions, management buyouts, growth financings, recapitalizations, and refinancing. The firm seeks to partner with entrepreneurs, business owners and management teams and generally provides “one stop” financing alternatives within its lower middle market portfolio. It prefers to invest in air freight and logistics, auto components, building products, chemicals, commercial services, computers, construction and engineering, consumer finance, consumer services, electronic equipment, energy equipment and services, financial services, health care equipment, health care providers, hotels, restaurants, and leisure, internet software and services, IT Services, machinery, oil, gas and consumable fuels, paper and forest products, professional and industrial services, road and rail, software, specialty retail, telecommunication, consumer discretionary, energy, materials, technology, and transportation. The firm typically invests in lower middle market companies generally with annual revenues between $10 million and $150 million. It prefers to invest in ranging between $5 million and $100 million in equity investment and enterprise value in ranging between $3 million and $20 million. The firm typically prefers to invest in the range of $5 million and $150 million per transaction in debt investment value and in the range of $3 million and $75 million in annual EBITDA in between $3 million and $25 million in lower middle market $5 million and $75 million in credit solution. The firm’s middle market debt investments are made in businesses that are generally larger in size than its lower middle market portfolio companies. It takes 5 percent minority and up to 50 percent majority equity investments. Main Street Capital Corporation was founded in 2007 and is based in Houston, Texas with an additional office in Chojnów, Poland.

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