Horizon Technology Finance (NASDAQ:HRZN – Get Free Report) and Rand Capital (NASDAQ:RAND – Get Free Report) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their profitability, earnings, analyst recommendations, valuation, institutional ownership, dividends and risk.
Profitability
This table compares Horizon Technology Finance and Rand Capital’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Horizon Technology Finance | 22.55% | 13.63% | 5.53% |
| Rand Capital | -162.06% | 5.87% | 5.75% |
Insider & Institutional Ownership
4.9% of Horizon Technology Finance shares are held by institutional investors. 0.3% of Horizon Technology Finance shares are held by company insiders. Comparatively, 68.2% of Rand Capital shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.
Valuation and Earnings
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Horizon Technology Finance | $32.97 million | 8.74 | -$2.66 million | $0.43 | 9.81 |
| Rand Capital | $6.47 million | 4.75 | -$8.04 million | ($3.10) | -3.34 |
Horizon Technology Finance has higher revenue and earnings than Rand Capital. Rand Capital is trading at a lower price-to-earnings ratio than Horizon Technology Finance, indicating that it is currently the more affordable of the two stocks.
Volatility and Risk
Horizon Technology Finance has a beta of 1, indicating that its stock price has a similar volatility profile to the S&P 500.Comparatively, Rand Capital has a beta of 0.08, indicating that its stock price is 92% less volatile than the S&P 500.
Dividends
Horizon Technology Finance pays an annual dividend of $0.72 per share and has a dividend yield of 17.1%. Rand Capital pays an annual dividend of $1.16 per share and has a dividend yield of 11.2%. Horizon Technology Finance pays out 167.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Rand Capital pays out -37.4% of its earnings in the form of a dividend.
Analyst Ratings
This is a summary of current ratings and target prices for Horizon Technology Finance and Rand Capital, as reported by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Horizon Technology Finance | 1 | 5 | 1 | 0 | 2.00 |
| Rand Capital | 1 | 0 | 0 | 0 | 1.00 |
Horizon Technology Finance currently has a consensus price target of $5.65, indicating a potential upside of 33.89%. Given Horizon Technology Finance’s stronger consensus rating and higher possible upside, equities analysts clearly believe Horizon Technology Finance is more favorable than Rand Capital.
Summary
Horizon Technology Finance beats Rand Capital on 13 of the 16 factors compared between the two stocks.
About Horizon Technology Finance
Horizon Technology Finance Corporation is a business development company specializing in lending and and investing in development-stage investments. It focuses on making secured debt and venture lending investments to venture capital backed companies in the technology, life science, healthcare information and services, cleantech and sustainability industries. It seeks to invest in companies in the United States.
About Rand Capital
Rand Capital Corporation is a business development company specializing in subordinated debt with warrants or preferred equity and venture capital investments. Within private equity, the firm specializing in capital growth and lower middle market investments. Within venture capital, it specializing in early to late-stage private businesses. It does not prefer to invest in real estate sector. It prefers to invest in software, professional services, manufacturing, consumer, healthcare, automotive and public d stocks. It prefers to invest in East or Midwest U.S. operations sectors. It typically invests between $0.75 million and $5 million with initial target size of $1.5 million. It seeks to invest in companies having more than $2 million in revenue or having excess of $1.5 million and up to $5 million in EBITDA. It prefers to be a minority stake and seeks to take a Board seat in its portfolio companies. It typically holds its investments for a period up to five years.
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