Critical Comparison: OFS Capital (NASDAQ:OFS) versus CION Investment (NYSE:CION)

CION Investment (NYSE:CION) and OFS Capital (NASDAQ:OFS) are both small-cap finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their earnings, profitability, dividends, valuation, analyst recommendations, institutional ownership and risk.

Volatility and Risk

CION Investment has a beta of 1.13, meaning that its share price is 13% more volatile than the S&P 500. Comparatively, OFS Capital has a beta of 0.86, meaning that its share price is 14% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
CION Investment	-8.57%	12.42%	4.95%
OFS Capital	-81.33%	8.75%	3.23%

Earnings and Valuation

This table compares CION Investment and OFS Capital”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
CION Investment	$240.82 million	1.43	-$20.63 million	($0.39)	-17.55
OFS Capital	$40.69 million	1.14	-$33.09 million	($2.47)	-1.40

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

Insider & Institutional Ownership

32.0% of CION Investment shares are owned by institutional investors. Comparatively, 10.8% of OFS Capital shares are owned by institutional investors. 0.6% of CION Investment shares are owned by company insiders. Comparatively, 0.5% of OFS Capital shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Dividends

CION Investment pays an annual dividend of $1.20 per share and has a dividend yield of 17.5%. OFS Capital pays an annual dividend of $0.68 per share and has a dividend yield of 19.7%. CION Investment pays out -307.7% of its earnings in the form of a dividend. OFS Capital pays out -27.5% 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. CION Investment has increased its dividend for 1 consecutive years and OFS Capital has increased its dividend for 3 consecutive years. OFS Capital is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Ratings

This is a breakdown of current ratings and target prices for CION Investment and OFS Capital, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
CION Investment	3	0	0	0	1.00
OFS Capital	1	1	0	0	1.50

CION Investment presently has a consensus price target of $7.00, suggesting a potential upside of 2.29%. OFS Capital has a consensus price target of $7.00, suggesting a potential upside of 102.90%. Given OFS Capital’s stronger consensus rating and higher possible upside, analysts clearly believe OFS Capital is more favorable than CION Investment.

Summary

CION Investment beats OFS Capital on 11 of the 16 factors compared between the two stocks.

About CION Investment

CION Investment Corporation is a business development company. It specializes in investments in senior secured loans, including unitranche loans, First Lien, second lien loans, long-term subordinated loans, and mezzanine loans; equity interests such as warrants or options; and corporate bonds; and other debt securities in middle-market companies. The firm invests in growth capital, acquisitions, leveraged buyouts, market/product expansion, refinancing and recapitalization. The fund also invests up to 30 percent of their assets opportunistically in other types of investments, including the securities of larger public companies and foreign securities. It also makes investments in the secondary loan market. The fund does not invest in start-up companies, turnaround situations, or companies with speculative business plans. The fund prefers to invest in high tech industries, healthcare, pharmaceuticals, business services, media, chemicals, plastic, rubber, telecommunication, consumer services, advertising, printing and publishing, consumer goods, durables, diversified financials, and other industries. It also invests in homebuilding, restaurants, beverage and tobacco bars, broadcasting, distributors, Non-durable good distribution, food beverage and tobacco, energy, oil gas and consumables fuels, insurance, aerospace and defense, industrial machinery, paper and forest product machinery, information technology, metals and mining, and real estate. It primarily seeks to invest in the United States. The fund seeks to invest between $5 million and $50 million in companies with an EBITDA between $25 million and $75 million with average targeted hold of $25 million. It also purchases minority interests in the form of common or preferred equity in the target companies, typically in conjunction with its debt investments or through a co-investment with a financial sponsor. The fund seeks to exit its investments through an initial public offering of common stock, a merger, a sale, or other recapitalization.

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.