Reviewing Capital Southwest (NASDAQ:CSWC) & Carlyle Group (NASDAQ:CG)

Carlyle Group (NASDAQ:CG) and Capital Southwest (NASDAQ:CSWC) are both finance companies, but which is the better stock? We will contrast the two companies based on the strength of their analyst recommendations, earnings, institutional ownership, dividends, risk, profitability and valuation.

Analyst Ratings

This is a breakdown of recent ratings and recommmendations for Carlyle Group and Capital Southwest, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Carlyle Group	1	8	8	0	2.41
Capital Southwest	1	3	6	0	2.50

Carlyle Group currently has a consensus price target of $66.14, suggesting a potential upside of 11.09%. Capital Southwest has a consensus price target of $23.64, suggesting a potential upside of 9.56%. Given Carlyle Group’s higher possible upside, research analysts plainly believe Carlyle Group is more favorable than Capital Southwest.

Volatility & Risk

Carlyle Group has a beta of 2.06, meaning that its stock price is 106% more volatile than the S&P 500. Comparatively, Capital Southwest has a beta of 0.76, meaning that its stock price is 24% less volatile than the S&P 500.

Insider and Institutional Ownership

55.9% of Carlyle Group shares are held by institutional investors. Comparatively, 23.4% of Capital Southwest shares are held by institutional investors. 26.3% of Carlyle Group shares are held by insiders. Comparatively, 2.8% of Capital Southwest shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Carlyle Group and Capital Southwest’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Carlyle Group	16.91%	23.46%	6.21%
Capital Southwest	39.79%	13.64%	6.44%

Valuation and Earnings

This table compares Carlyle Group and Capital Southwest”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Carlyle Group	$5.43 billion	3.95	$1.02 billion	$1.79	33.26
Capital Southwest	$204.44 million	6.07	$70.55 million	$1.61	13.40

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

Dividends

Carlyle Group pays an annual dividend of $1.40 per share and has a dividend yield of 2.4%. Capital Southwest pays an annual dividend of $2.32 per share and has a dividend yield of 10.8%. Carlyle Group pays out 78.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Capital Southwest pays out 144.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Carlyle Group has increased its dividend for 4 consecutive years and Capital Southwest has increased its dividend for 2 consecutive years.

Summary

Carlyle Group beats Capital Southwest on 12 of the 17 factors compared between the two stocks.

About Carlyle Group

The Carlyle Group Inc. is an investment firm specializing in direct and fund of fund investments. Within direct investments, it specializes in management-led/ Leveraged buyouts, privatizations, divestitures, strategic minority equity investments, structured credit, global distressed and corporate opportunities, small and middle market, equity private placements, consolidations and buildups, senior debt, mezzanine and leveraged finance, and venture and growth capital financings, seed/startup, early venture, emerging growth, turnaround, mid venture, late venture, PIPES. The firm invests across four segments which include Corporate Private Equity, Real Assets, Global Market Strategies, and Solutions. The firm typically invests in industrial, agribusiness, ecological sector, fintech, airports, parking, Plastics, Rubber, diversified natural resources, minerals, farming, aerospace, defense, automotive, consumer, retail, industrial, infrastructure, energy, power, healthcare, software, software enabled services, semiconductors, communications infrastructure, financial technology, utilities, gaming, systems and related supply chain, electronic systems, systems, oil and gas, processing facilities, power generation assets, technology, systems, real estate, financial services, transportation, business services, telecommunications, media, and logistics sectors. Within the industrial sector, the firm invests in manufacturing, building products, packaging, chemicals, metals and mining, forestry and paper products, and industrial consumables and services. In consumer and retail sectors, it invests in food and beverage, retail, restaurants, consumer products, domestic consumption, consumer services, personal care products, direct marketing, and education. Within aerospace, defense, business services, and government services sectors, it seeks to invest in defense electronics, manufacturing and services, government contracting and services, information technology, distribution companies. In telecommunication and media sectors, it invests in cable TV, directories, publishing, entertainment and content delivery services, wireless infrastructure/services, fixed line networks, satellite services, broadband and Internet, and infrastructure. Within real estate, the firm invests in office, hotel, industrial, retail, for sale residential, student housing, hospitality, multifamily residential, homebuilding and building products, and senior living sectors. The firm seeks to make investments in growing business including those with overleveraged balance sheets. The firm seeks to hold its investments for four to six years. In the healthcare sector, it invests in healthcare services, outsourcing services, companies running clinical trials for pharmaceutical companies, managed care, pharmaceuticals, pharmaceutical related services, healthcare IT, medical, products, and devices. It seeks to invest in companies based in Sub-Saharan focusing on Ghana, Kenya, Mozambique, Botswana, Nigeria, Uganda, West Africa, North Africa and South Africa focusing on Tanzania and Zambia; Asia focusing on Pakistan, India, South East Asia, Indonesia, Philippines, Vietnam, Korea, and Japan; Australia; New Zealand; Europe focusing on France, Italy, Denmark, United Kingdom, Germany, Austria, Belgium, Finland, Iceland, Ireland, Netherlands, Norway, Portugal, Spain, Benelux , Sweden, Switzerland, Hungary, Poland, and Russia; Middle East focusing on Bahrain, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Turkey, and UAE; North America focusing on United States which further invest in Southeastern United States, Texas, Boston, San Francisco Bay Area and Pacific Northwest; Asia Pacific; Soviet Union, Central-Eastern Europe, and Israel; Nordic region; and South America focusing on Mexico, Argentina, Brazil, Chile, and Peru. The firm seeks to invest in food, financial, and healthcare industries in Western China. In the real estate sector, the firm seeks to invest in various locations across Europe focusing on France and Central Europe, United States, Asia focusing on China, and Latin America. It typically invests between $1 million and $50 million for venture investments and between $50 million and $2 billion for buyouts in companies with enterprise value of between $31.57 million and $1000 million and sales value of $10 million and $500 million. It seeks to invest in companies with market capitalization greater than $50 million and EBITDA between $5 million to $25 million. It prefers to take a majority or a minority stake. While investing in Japan, it does not invest in companies with more than 1,000 employees and prefers companies' worth between $100 million and $150 million. The firm originates, structures, and acts as lead equity investor in the transactions. The Carlyle Group Inc. was founded in 1987 and is based in Washington, District of Columbia with additional offices in 21 countries across 5 continents (North America, South America, Asia, Australia and Europe).

About Capital Southwest

Capital Southwest Corporation is a business development company specializing in credit and private equity and venture capital investments in middle market companies, mezzanine, later stage, mature, late venture, emerging growth, buyouts, industry consolidation, recapitalizations and growth capital investments. It does not invest in startups, publicly traded companies, real estate developments, project finance opportunities, oil and gas exploration businesses, troubled companies, turnarounds, and companies in which significant senior management is departing. In lower middle market, the firm typically invests in growth financing, bolt-on acquisitions, new platform acquisitions, refinancing, dividend recapitalizations, sponsor-led buyouts, and management buyouts situations. The investment structures are Unitranche debt, subordinated debt, senior debt, first and second lien debt, and preferred and common equity. The firm makes equity co-investments alongside debt investments, up to 20% of total check and only makes non-control investments. The firm is Industry agnostic, but it prefers to invest in Industrial manufacturing and services, value-added distribution, healthcare products and services, business services, specialty chemicals, food and beverage, tech-enabled services and SaaS models. The firm seeks to invest in energy services and products, industrial technologies, and specialty chemicals and products. Within energy services and products, the firm seeks to invest in each segment of the industry, including upstream, midstream and downstream, excluding exploration and production with a focus on differentiated products and services, equipment and tool rental, consumable products, and drilling and completion chemicals. Within industrial technologies, it seeks to invest in automation and process controls, handling and packaging equipment, industrial filtration and fluid handling, measurement, monitoring and testing, professional tools, and sensors and instrumentation. Within and specialty chemicals and products, the firm seeks to invest in businesses that develop and manufacture highly differentiated chemicals and products including adhesives, coatings and sealants, catalysts and absorbents, cosmeceuticals, fine chemicals, flavors and fragrances, performance lubricants, polymers, plastics and composites, chemical dispensing and filtration equipment, professional and industrial trade consumables and tools, engineered solutions for HVAC, plumbing, and electrical installations, specified high performance materials for fire protection and oilfield applications. It may also invest in exceptional opportunities in building products. The firm seeks to invest in the United States and North America. The firm seeks to make investments ranging from $5 million and $25 million in securities. It leads $5 to $70 million financings, Its Target holds of $5 million and $45 million, and the firm is willing to backstop up to $55mm with an active network of co-investors. It seeks to invest in the firm with minimum EBITDA is $3 million and $25 million. In addition to making direct investments, the firm allocates capital to syndicated first and second lien term loans in the upper middle market. Criteria for Upper Middle Market Syndicated 1st Lien is EBITDA Size more than $30 million, Closing Leverage greater than 4 times, investment hold size between $5 million and $7 million up to $15mm with senior loan fund, investment yield greater than 6.5%. Criteria for Upper Middle Market Syndicated 2nd Lien is EBITDA Size more than $50 million, Closing Leverage greater than 6 times, investment hold size between $5 million and $7 million, investment yield greater than 9%. It prefers to take a majority and minority stake. The firm has the flexibility to hold investments for very long period in its portfolio companies. It may also invest through warrants. The firm prefers to take Board participation in its portfolio companies. Capital Southwest Corporation was founded on April 19, 1961 and is based in Dallas, Texas.