Head to Head Comparison: Bain Capital Specialty Finance (NYSE:BCSF) and SLR Investment (NASDAQ:SLRC)

Bain Capital Specialty Finance (NYSE:BCSF) and SLR Investment (NASDAQ:SLRC) are both small-cap finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their institutional ownership, risk, earnings, dividends, valuation, profitability and analyst recommendations.

Earnings and Valuation

This table compares Bain Capital Specialty Finance and SLR Investment”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Bain Capital Specialty Finance	$88.67 million	9.25	$98.76 million	$1.14	11.09
SLR Investment	$218.54 million	3.09	$92.54 million	$1.64	7.54

Bain Capital Specialty Finance has higher earnings, but lower revenue than SLR Investment. SLR Investment is trading at a lower price-to-earnings ratio than Bain Capital Specialty Finance, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Bain Capital Specialty Finance and SLR Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Bain Capital Specialty Finance	27.00%	10.44%	4.35%
SLR Investment	41.81%	8.33%	3.25%

Volatility and Risk

Bain Capital Specialty Finance has a beta of 0.58, meaning that its share price is 42% less volatile than the S&P 500. Comparatively, SLR Investment has a beta of 0.64, meaning that its share price is 36% less volatile than the S&P 500.

Dividends

Bain Capital Specialty Finance pays an annual dividend of $1.68 per share and has a dividend yield of 13.3%. SLR Investment pays an annual dividend of $1.24 per share and has a dividend yield of 10.0%. Bain Capital Specialty Finance pays out 147.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. SLR Investment pays out 75.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Bain Capital Specialty Finance has raised its dividend for 4 consecutive years. Bain Capital Specialty Finance is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Bain Capital Specialty Finance and SLR Investment, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Bain Capital Specialty Finance	0	2	1	0	2.33
SLR Investment	3	2	2	0	1.86

Bain Capital Specialty Finance presently has a consensus target price of $14.00, suggesting a potential upside of 10.72%. SLR Investment has a consensus target price of $14.10, suggesting a potential upside of 14.08%. Given SLR Investment’s higher possible upside, analysts clearly believe SLR Investment is more favorable than Bain Capital Specialty Finance.

Insider & Institutional Ownership

35.3% of SLR Investment shares are held by institutional investors. 0.6% of Bain Capital Specialty Finance shares are held by insiders. Comparatively, 8.8% of SLR Investment shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Summary

SLR Investment beats Bain Capital Specialty Finance on 9 of the 17 factors compared between the two stocks.

About Bain Capital Specialty Finance

Bain Capital Specialty Finance, Inc. is business development company specializing in direct loans to middle-market companies. The fund seeks to invest in senior investments with a first or second lien on collateral, senior first lien, stretch senior, senior second lien, unitranche, mezzanine debt, junior securities, other junior investments, and secondary purchases of assets or portfolios that primarily consist of middle-market corporate debt. It typically invests in companies with EBITDA between $10 million and $150 million.

About SLR Investment

SLR Investment Corp. is a business development company specializing in secured debt (first lien unitranche and second lien), subordinated (unsecured) debt, minority equity, leveraged buyouts, acquisitions, recapitalizations, general refinancing, growth capital and strategic income-oriented control equity investments in leveraged middle market companies. The fund invests in aerospace and defense; air freight & logistics; asset management; automotive; banking; beverage, food and tobacco; building products; buildings and real estate; broadcasting and entertainment; cargo transport; commercial services and supplies; communications equipment; chemicals, plastics and rubber; containers, packaging and glass; construction & engineering; diversified/conglomerate manufacturing; consumer Finance; distributors; diversified/conglomerate services; diversified financial services; diversified real estate activities; food products; Footwear; Education Services; diversified telecommunications services; electronics; farming and agriculture; finance; grocery; health care equipment and supplies; health care facilities; education and childcare; home and office furnishing, durable consumer products; hotels, motels, inns and gaming; insurance; restaurants, leisure, amusement, and entertainment; leisure equipment tolls and services, media, multiline retail, multi sector holdings; paper and forest products; personal products; professional services, research and consulting services, software; specialty retail; textiles apparel and luxury goods, thrifts and mortgage finance, trading companies and distributors, utilities, and wireless telecommunication services; industrial conglomerates; internet software and services, IT services, machinery; mining, steel, iron, and non-precious metals; oil and gas; personal, food and miscellaneous services; printing and publishing; retail stores; telecommunications; textiles and leather; and utilities. It also invests in life sciences with focus on specialty pharmaceuticals, medical devices, biotech, health Care Providers and services; health Care technology, enabling technologies and tools. The fund primarily invests in United States. The fund’s investments generally range between $5 million and $100 million. The fund invests in companies with revenues between $50 million and $1 billion and EBITDA between $15 million and $100 million. It invests in the form of senior secured loans, mezzanine loans, and equity securities. It may also seek investments in thinly traded public companies and also make secondary investments. The fund makes non-control equity investments. It primarily exits within three years of the initial capital commitment.