OFS Capital (NASDAQ:OFS – Get Free Report) and Carlyle Secured Lending (NASDAQ:CGBD – Get Free Report) are both small-cap finance companies, but which is the better business? We will compare the two companies based on the strength of their valuation, dividends, profitability, institutional ownership, risk, analyst recommendations and earnings.
Volatility and Risk
OFS Capital has a beta of 0.86, indicating that its share price is 14% less volatile than the S&P 500. Comparatively, Carlyle Secured Lending has a beta of 0.65, indicating that its share price is 35% less volatile than the S&P 500.
Analyst Recommendations
This is a summary of recent ratings for OFS Capital and Carlyle Secured Lending, as reported by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| OFS Capital | 1 | 1 | 0 | 0 | 1.50 |
| Carlyle Secured Lending | 0 | 5 | 3 | 0 | 2.38 |
Earnings and Valuation
This table compares OFS Capital and Carlyle Secured Lending”s top-line revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| OFS Capital | $40.69 million | 1.14 | -$33.09 million | ($2.47) | -1.40 |
| Carlyle Secured Lending | $80.99 million | 9.56 | $69.97 million | $1.02 | 10.75 |
Carlyle Secured Lending has higher revenue and earnings than OFS Capital. OFS Capital is trading at a lower price-to-earnings ratio than Carlyle Secured Lending, indicating that it is currently the more affordable of the two stocks.
Dividends
OFS Capital pays an annual dividend of $0.68 per share and has a dividend yield of 19.7%. Carlyle Secured Lending pays an annual dividend of $1.60 per share and has a dividend yield of 14.6%. OFS Capital pays out -27.5% of its earnings in the form of a dividend. Carlyle Secured Lending pays out 156.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. OFS Capital has raised 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.
Institutional & Insider Ownership
10.8% of OFS Capital shares are owned by institutional investors. Comparatively, 24.5% of Carlyle Secured Lending shares are owned by institutional investors. 0.5% of OFS Capital shares are owned by insiders. Comparatively, 0.6% of Carlyle Secured Lending shares are owned by 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.
Profitability
This table compares OFS Capital and Carlyle Secured Lending’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| OFS Capital | -81.33% | 8.75% | 3.23% |
| Carlyle Secured Lending | 27.38% | 8.56% | 3.90% |
Summary
Carlyle Secured Lending beats OFS Capital on 11 of the 17 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 Carlyle Secured Lending
Carlyle Secured Lending, Inc. is business development company specializing in first lien debt, senior secured loans, second lien senior secured loan unsecured debt, mezzanine debt and investments in equities. It specializes in directly investing. It specializes in middle market. It targets healthcare and pharmaceutical, aerospace and defense, high tech industries, business services, software, beverage food and tobacco, hotel gamming and leisure, banking finance insurance and in real estate sector. The fund seeks to invest across United States of America, Luxembourg, Cayman Islands, Cyprus, and United Kingdom. It invests in companies with EBITDA between $25 million and $100 million.
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