Contrasting Saratoga Investment (NYSE:SAR) & Main Street Capital (NYSE:MAIN)

Main Street Capital (NYSE:MAIN) and Saratoga Investment (NYSE:SAR) are both finance companies, but which is the superior business? We will contrast the two companies based on the strength of their risk, valuation, institutional ownership, earnings, dividends, profitability and analyst recommendations.

Analyst Recommendations

This is a breakdown of recent ratings for Main Street Capital and Saratoga Investment, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Main Street Capital	0	5	4	0	2.44
Saratoga Investment	0	6	0	0	2.00

Main Street Capital presently has a consensus target price of $62.43, indicating a potential upside of 3.32%. Saratoga Investment has a consensus target price of $23.63, indicating a potential upside of 2.47%. Given Main Street Capital’s stronger consensus rating and higher possible upside, research analysts plainly believe Main Street Capital is more favorable than Saratoga Investment.

Dividends

Main Street Capital pays an annual dividend of $3.06 per share and has a dividend yield of 5.1%. Saratoga Investment pays an annual dividend of $3.00 per share and has a dividend yield of 13.0%. Main Street Capital pays out 50.7% of its earnings in the form of a dividend. Saratoga Investment pays out 128.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Main Street Capital has raised its dividend for 4 consecutive years.

Risk & Volatility

Main Street Capital has a beta of 0.8, meaning that its share price is 20% less volatile than the S&P 500. Comparatively, Saratoga Investment has a beta of 0.56, meaning that its share price is 44% less volatile than the S&P 500.

Valuation and Earnings

This table compares Main Street Capital and Saratoga Investment”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Main Street Capital	$541.03 million	10.01	$508.08 million	$6.03	10.02
Saratoga Investment	$148.85 million	2.49	$28.09 million	$2.34	9.85

Main Street Capital has higher revenue and earnings than Saratoga Investment. Saratoga 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.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Main Street Capital	95.59%	12.39%	6.77%
Saratoga Investment	27.19%	10.09%	3.29%

Insider and Institutional Ownership

20.3% of Main Street Capital shares are held by institutional investors. Comparatively, 19.1% of Saratoga Investment shares are held by institutional investors. 4.0% of Main Street Capital shares are held by company insiders. Comparatively, 10.0% of Saratoga Investment shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Summary

Main Street Capital beats Saratoga Investment on 15 of the 17 factors compared between the two stocks.

About Main Street Capital

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.

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.