Saratoga Investment (NYSE:SAR – Get Free Report) and Rand Capital (NASDAQ:RAND – Get Free Report) are both small-cap finance companies, but which is the superior stock? We will compare the two companies based on the strength of their dividends, analyst recommendations, risk, profitability, institutional ownership, valuation and earnings.
Analyst Ratings
This is a summary of recent ratings for Saratoga Investment and Rand Capital, as reported by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Saratoga Investment | 0 | 5 | 0 | 0 | 2.00 |
| Rand Capital | 1 | 0 | 0 | 0 | 1.00 |
Saratoga Investment currently has a consensus target price of $23.00, indicating a potential upside of 2.85%. Given Saratoga Investment’s stronger consensus rating and higher probable upside, research analysts plainly believe Saratoga Investment is more favorable than Rand Capital.
Earnings and Valuation
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Saratoga Investment | $49.92 million | 7.29 | $36.60 million | $2.33 | 9.60 |
| Rand Capital | $6.47 million | 4.80 | -$8.04 million | ($3.10) | -3.37 |
Saratoga Investment has higher revenue and earnings than Rand Capital. Rand Capital is trading at a lower price-to-earnings ratio than Saratoga Investment, indicating that it is currently the more affordable of the two stocks.
Risk and Volatility
Saratoga Investment has a beta of 0.54, indicating that its share price is 46% less volatile than the S&P 500. Comparatively, Rand Capital has a beta of 0.08, indicating that its share price is 92% less volatile than the S&P 500.
Insider & Institutional Ownership
19.1% of Saratoga Investment shares are held by institutional investors. 10.0% of Saratoga Investment 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, endowments and large money managers believe a company will outperform the market over the long term.
Profitability
This table compares Saratoga Investment and Rand Capital’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Saratoga Investment | 29.12% | 9.29% | 3.17% |
| Rand Capital | -162.06% | 5.87% | 5.75% |
Dividends
Saratoga Investment pays an annual dividend of $3.00 per share and has a dividend yield of 13.4%. Rand Capital pays an annual dividend of $1.16 per share and has a dividend yield of 11.1%. Saratoga Investment pays out 128.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Rand Capital pays out -37.4% of its earnings in the form of a dividend.
Summary
Saratoga Investment beats Rand Capital on 12 of the 15 factors compared between the two stocks.
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.
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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