Hennessy Advisors (NASDAQ:HNNA) vs. Portman Ridge Finance (NASDAQ:PTMN) Head-To-Head Review

Portman Ridge Finance (NASDAQ:PTMN) and Hennessy Advisors (NASDAQ:HNNA) are both small-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, institutional ownership, profitability, valuation, risk, dividends and analyst recommendations.

Profitability

This table compares Portman Ridge Finance and Hennessy Advisors’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Portman Ridge Finance	-15.92%	11.49%	4.54%
Hennessy Advisors	26.52%	9.33%	5.72%

Volatility and Risk

Portman Ridge Finance has a beta of 0.6, suggesting that its share price is 40% less volatile than the S&P 500. Comparatively, Hennessy Advisors has a beta of 0.65, suggesting that its share price is 35% less volatile than the S&P 500.

Institutional and Insider Ownership

30.1% of Portman Ridge Finance shares are held by institutional investors. Comparatively, 10.3% of Hennessy Advisors shares are held by institutional investors. 2.1% of Portman Ridge Finance shares are held by company insiders. Comparatively, 36.0% of Hennessy Advisors shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Valuation & Earnings

This table compares Portman Ridge Finance and Hennessy Advisors”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Portman Ridge Finance	-$2.85 million	-33.66	-$5.93 million	($0.93)	-7.81
Hennessy Advisors	$34.15 million	2.20	$9.96 million	$1.14	8.34

Hennessy Advisors has higher revenue and earnings than Portman Ridge Finance. Portman Ridge Finance is trading at a lower price-to-earnings ratio than Hennessy Advisors, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current recommendations for Portman Ridge Finance and Hennessy Advisors, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Portman Ridge Finance	0	1	0	0	2.00
Hennessy Advisors	0	1	0	0	2.00

Portman Ridge Finance presently has a consensus price target of $14.00, indicating a potential upside of 92.84%. Given Portman Ridge Finance’s higher probable upside, equities research analysts clearly believe Portman Ridge Finance is more favorable than Hennessy Advisors.

Dividends

Portman Ridge Finance pays an annual dividend of $1.88 per share and has a dividend yield of 25.9%. Hennessy Advisors pays an annual dividend of $0.60 per share and has a dividend yield of 6.3%. Portman Ridge Finance pays out -202.2% of its earnings in the form of a dividend. Hennessy Advisors pays out 52.6% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Portman Ridge Finance is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Hennessy Advisors beats Portman Ridge Finance on 9 of the 14 factors compared between the two stocks.

About Portman Ridge Finance

Portman Ridge Finance Corporation is a business development company specializing in investments in unitranche loans (including last out), first lien loans, second lien loans, subordinated debt, equity co-investment, mezzanine, buyout in middle market companies. It also makes acquisitions in businesses complementary to the firm's business. It primarily invests in healthcare, cargo transport, manufacturing, industrial & environmental services, logistics & distribution, media & telecommunications, real estate, education, automotive, agriculture, aerospace/defense, packaging, electronics, finance, non-durable consumer, consumer products, business services, utilities, insurance, and food and beverage sectors. The fund typically invests $1 million to $20 million in its portfolio companies. It provides senior secured term loans from $2 million to $20 million maturing in five to seven years; second lien term loans from $5 million to $15 million maturing in six to eight years; senior unsecured loans $5 million to $23 million maturing in six to eight years; mezzanine loans from $5 million to $15 million maturing in seven to ten years; and equity investments from $1 to $5 million. The fund targets the companies with EBITDA between $5 million and $25 million. While investing in debt securities, it invests in those middle market firms with EBITDA between $10 million and $50 million and/or total debt between $25 million and $150 million. It invests in minority, and majority or control equity positions alongside its private equity sponsor partners.

About Hennessy Advisors

Hennessy Advisors, Inc. is an employee owned investment manager. It provides its services to Hennessy Funds and investment companies. The firm launches and manages equity, fixed income, and balanced mutual funds. It invests in the public equity and fixed income markets across the globe. The firm primarily invests in growth stocks of companies. It conducts in-house research to make its investments. Hennessy Advisors, Inc. was founded in 1989 and is based in Novato, California with additional offices in Boston, Massachusetts and Chapel Hill, North Carolina.