Comparing Saratoga Investment (NYSE:SAR) & PhenixFIN (NYSE:PFX)

PhenixFIN (NYSE:PFX) and Saratoga Investment (NYSE:SAR) are both small-cap finance companies, but which is the better investment? We will compare the two companies based on the strength of their earnings, institutional ownership, analyst recommendations, risk, valuation, dividends and profitability.

Volatility & Risk

PhenixFIN has a beta of 0.32, meaning that its share price is 68% less volatile than the S&P 500. Comparatively, Saratoga Investment has a beta of 0.62, meaning that its share price is 38% less volatile than the S&P 500.

Profitability

This table compares PhenixFIN and Saratoga Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
PhenixFIN	72.98%	2.95%	1.68%
Saratoga Investment	-3.35%	8.66%	2.78%

Dividends

PhenixFIN pays an annual dividend of $0.48 per share and has a dividend yield of 1.1%. Saratoga Investment pays an annual dividend of $3.00 per share and has a dividend yield of 23.3%. PhenixFIN pays out 19.9% of its earnings in the form of a dividend. Saratoga Investment pays out -1,200.0% 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. Saratoga Investment is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional and Insider Ownership

43.3% of PhenixFIN shares are owned by institutional investors. Comparatively, 19.1% of Saratoga Investment shares are owned by institutional investors. 25.2% of PhenixFIN shares are owned by insiders. Comparatively, 10.6% of Saratoga Investment shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Analyst Ratings

This is a breakdown of recent ratings for PhenixFIN and Saratoga Investment, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
PhenixFIN	0	1	0	0	2.00
Saratoga Investment	1	4	0	0	1.80

Saratoga Investment has a consensus price target of $19.67, suggesting a potential upside of 52.72%. Given Saratoga Investment’s higher possible upside, analysts clearly believe Saratoga Investment is more favorable than PhenixFIN.

Earnings & Valuation

This table compares PhenixFIN and Saratoga Investment”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
PhenixFIN	$14.16 million	5.79	$18.62 million	$2.41	17.63
Saratoga Investment	$125.71 million	1.59	$36.60 million	($0.25)	-51.51

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

Summary

Saratoga Investment beats PhenixFIN on 9 of the 15 factors compared between the two stocks.

About PhenixFIN

PhenixFIN Corporation is a business development company. The firm seeks to invest in privately negotiated debt and equity securities of small and middle market companies. It primarily invests in the following sectors: business services; buildings and real estate; automobile; oil and gas; aerospace and defense; home and office furnishings, housewares, and durable consumer products; healthcare, education and childcare; personal, food, and miscellaneous services; retail stores, diversified or conglomerate manufacturing; telecommunications; mining, steel, iron, and non-precious metals; leisure, amusement, motion pictures, and entertainment; chemicals, plastics, and rubber; finance; personal and nondurable consumer products (manufacturing only); beverage, food, and tobacco; containers, packaging, and glass; structure finance securities; machinery (non-agriculture, non-construction, non-electric); diversified or conglomerate service; restaurant and franchise; electronics; and cargo transport. The fund seeks to invest in companies located in North America. The fund targets private debt transactions in companies with enterprise values or asset values between $25 million and $250 million. The fund seeks to invest in companies with debt investment values between $10 million and $50 million. It exits its investments between three years and seven years; it holds most of its investments to maturity or repayment, but may realize or sell some investments earlier. The fund may take a board seat on its investee companies and can also offer managerial assistance to certain portfolio companies. It structures its investments as first lien senior secured loans, second lien senior secured loans, senior secured notes, senior subordinated notes, subordinate notes, unitranche loans, and seeks warrants or other equity participation. The fund may co-invest in privately negotiated transactions under certain conditions. PhenixFIN Corporation was founded in 2010 and is headquartered in New York, New York.

About Saratoga Investment

Saratoga Investment Corp. is a business development company specializing in leveraged and management buyouts, acquisition financings, growth financings, recapitalization, debt refinancing, and transitional financing transactions at the lower end of middle market companies. It structures its investments as debt and equity by investing through first and second lien loans, mezzanine debt, co-investments, select high yield bonds, senior secured bonds, unsecured bonds, and preferred and common equity. The firm prefers to invest in aerospace, automotive aftermarket and services, business products and services, consumer products and services, education, environmental services, industrial services, financial services, food and beverage, healthcare products and services, logistics, distribution, manufacturing, restaurants services, food services, software services, technology services, specialty chemical, media and telecommunications. It seeks to invest in the United States. The firm primarily invests $5 million to $50 million in companies having EBITDA of $2 million or greater and revenues of $8 million to $250 million. The firm prefer to take a majority stake. It invests through direct lending as well as participation in loan syndicates. The firm was formerly known as GSC Investment Corp. Saratoga Investment Corp. was formed on 2007 and is based in New York, New York with an additional office in Florham Park, New Jersey.