Stellus Capital Investment (NYSE:SCM) vs. Bain Capital Specialty Finance (NYSE:BCSF) Head to Head Analysis

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

Insider & Institutional Ownership

13.2% of Stellus Capital Investment shares are owned by institutional investors. 4.0% of Stellus Capital Investment shares are owned by company insiders. Comparatively, 0.6% of Bain Capital Specialty Finance shares are owned by company 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.

Analyst Recommendations

This is a summary of current recommendations for Stellus Capital Investment and Bain Capital Specialty Finance, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Stellus Capital Investment	1	2	0	0	1.67
Bain Capital Specialty Finance	0	2	1	0	2.33

Stellus Capital Investment currently has a consensus price target of $9.00, indicating a potential downside of 6.64%. Bain Capital Specialty Finance has a consensus price target of $14.00, indicating a potential upside of 5.67%. Given Bain Capital Specialty Finance’s stronger consensus rating and higher possible upside, analysts plainly believe Bain Capital Specialty Finance is more favorable than Stellus Capital Investment.

Risk & Volatility

Stellus Capital Investment has a beta of 0.67, suggesting that its stock price is 33% less volatile than the S&P 500. Comparatively, Bain Capital Specialty Finance has a beta of 0.57, suggesting that its stock price is 43% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Stellus Capital Investment	26.48%	10.28%	3.74%
Bain Capital Specialty Finance	36.14%	10.74%	4.51%

Dividends

Stellus Capital Investment pays an annual dividend of $1.36 per share and has a dividend yield of 14.1%. Bain Capital Specialty Finance pays an annual dividend of $1.68 per share and has a dividend yield of 12.7%. Stellus Capital Investment pays out 144.7% 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 pays out 109.8% 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.

Earnings and Valuation

This table compares Stellus Capital Investment and Bain Capital Specialty Finance”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Stellus Capital Investment	$102.14 million	2.73	$27.05 million	$0.94	10.26
Bain Capital Specialty Finance	$273.24 million	3.15	$98.76 million	$1.53	8.66

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

Summary

Bain Capital Specialty Finance beats Stellus Capital Investment on 12 of the 17 factors compared between the two stocks.

About Stellus Capital Investment

Stellus Capital Investment Corporation is a business development company specializing in investments in private middle-market companies. It invests through first lien, second lien, unitranche, and mezzanine debt financing, often with a corresponding equity investment. The fund prefers to invest in US and Canada. The fund seeks to invest in companies with an EBITDA between $5 million and $50 million.

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.