OFS Capital (NASDAQ:OFS) & Amalgamated Financial (NASDAQ:AMAL) Critical Analysis

OFS Capital (NASDAQ:OFS) and Amalgamated Financial (NASDAQ:AMAL) are both finance companies, but which is the better business? We will compare the two companies based on the strength of their valuation, institutional ownership, earnings, profitability, risk, analyst recommendations and dividends.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for OFS Capital and Amalgamated Financial, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
OFS Capital	0	2	0	0	2.00
Amalgamated Financial	0	2	1	0	2.33

OFS Capital presently has a consensus target price of $7.00, indicating a potential upside of 50.41%. Amalgamated Financial has a consensus target price of $33.50, indicating a potential upside of 2.06%. Given OFS Capital’s higher possible upside, research analysts clearly believe OFS Capital is more favorable than Amalgamated Financial.

Volatility and Risk

OFS Capital has a beta of 0.87, suggesting that its stock price is 13% less volatile than the S&P 500. Comparatively, Amalgamated Financial has a beta of 0.84, suggesting that its stock price is 16% less volatile than the S&P 500.

Profitability

This table compares OFS Capital and Amalgamated Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
OFS Capital	7.52%	8.95%	3.41%
Amalgamated Financial	22.97%	14.75%	1.30%

Dividends

OFS Capital pays an annual dividend of $0.68 per share and has a dividend yield of 14.6%. Amalgamated Financial pays an annual dividend of $0.56 per share and has a dividend yield of 1.7%. OFS Capital pays out 283.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Amalgamated Financial pays out 16.9% of its earnings in the form of a dividend. OFS Capital has increased its dividend for 3 consecutive years and Amalgamated Financial has increased its dividend for 4 consecutive years.

Valuation and Earnings

This table compares OFS Capital and Amalgamated Financial”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
OFS Capital	$47.96 million	N/A	$28.44 million	$0.24	19.39
Amalgamated Financial	$323.80 million	3.03	$106.43 million	$3.32	9.89

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

Institutional & Insider Ownership

10.8% of OFS Capital shares are owned by institutional investors. Comparatively, 75.9% of Amalgamated Financial shares are owned by institutional investors. 0.5% of OFS Capital shares are owned by insiders. Comparatively, 1.3% of Amalgamated Financial shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Summary

Amalgamated Financial beats OFS Capital on 11 of the 16 factors compared between the two stocks.

About OFS Capital

OFS Capital Corporation is a business development company specializing in direct and fund investments as well as add-on acquisitions. It provides flexible capital solutions primarily through debt capital and to a lesser extent, minority equity investments serving the needs of U.S.-based middle-market companies across a broad array of industries. It does not invest in operational turnarounds or start-up businesses. For direct, it specializes in debt and structured equity investments, recapitalizations and refinancing, management and leveraged buyouts, acquisition financings, ownership transition, shareholder liquidity events, growth capital, independent sponsor transactions, ESOPs, and minority investments in the lower middle market companies. It invests in the aerospace and defense, business services, consumer products and services, construction & building, durable goods, capital equipment, automotive, food and beverage, healthcare & pharmaceutical, specialty chemicals, transportation cargo and logistics, value added distribution, franchising, and industrial and niche manufacturing sectors. The firm invests in companies based in United States. It seeks to invest between $3 million and $35 million, revenues between $15 million and $300 million, annual EBITDA between $5 million and $50 million, and Enterprise value between $10 million and $500 million. The firm seeks to invest in companies with debt investment values between $5 million and $25 million. The fund uses senior secured, unitranche loans, first-lien, second lien, subordinated/ mezzanine loans, warrants, and preferred equity securities and common equity securities. It prefers to take a minority as well as majority stake in the investments made. It also co-invests with its partners for additional capital.

About Amalgamated Financial

Amalgamated Financial Corp. operates as the bank holding company for Amalgamated Bank that provides commercial and retail banking, investment management, and trust and custody services for commercial and retail customers in the United States. The company accepts various deposit products, including non-interest bearing accounts, interest-bearing demand products, savings accounts, money market accounts, NOW accounts, and certificates of deposit. It also provides various commercial loans comprising commercial and industrial, multifamily mortgage, and commercial real estate loans; residential mortgage loans; and retail loans, such as residential real estate, consumer solar, and consumer and other loans. In addition, the company offers online banking, bill payment, online cash management, and safe deposit box rental services; debit and ATM cards; and trust, custody, and investment management services comprising asset safekeeping, corporate actions, income collections, proxy, account transition, asset transfers, and conversion management services. Further, it provides investment products, such as funds spanning equity, fixed-income, real estate, and alternative investment products; and brokerage, asset management, and insurance products. Amalgamated Financial Corp. was founded in 1923 and is headquartered in New York, New York.