BlackRock Capital Investment Corporation (NASDAQ: BKCC) and WhiteHorse Finance (NASDAQ:WHF) are both finance companies, but which is the better business? We will compare the two businesses based on the strength of their earnings, dividends, valuation, institutional ownership, profitability, risk and analyst recommendations.

Insider and Institutional Ownership

29.0% of BlackRock Capital Investment Corporation shares are owned by institutional investors. Comparatively, 9.6% of WhiteHorse Finance shares are owned by institutional investors. 1.3% of BlackRock Capital Investment Corporation shares are owned by company insiders. Comparatively, 1.4% of WhiteHorse Finance shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Earnings and Valuation

This table compares BlackRock Capital Investment Corporation and WhiteHorse Finance’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
BlackRock Capital Investment Corporation N/A N/A N/A ($0.07) -101.71
WhiteHorse Finance N/A N/A N/A $1.88 7.49

BlackRock Capital Investment Corporation is trading at a lower price-to-earnings ratio than WhiteHorse Finance, indicating that it is currently the more affordable of the two stocks.

Dividends

BlackRock Capital Investment Corporation pays an annual dividend of $0.72 per share and has a dividend yield of 10.1%. WhiteHorse Finance pays an annual dividend of $1.42 per share and has a dividend yield of 10.1%. BlackRock Capital Investment Corporation pays out -1,028.6% of its earnings in the form of a dividend. WhiteHorse Finance pays out 75.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. BlackRock Capital Investment Corporation is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a summary of recent recommendations and price targets for BlackRock Capital Investment Corporation and WhiteHorse Finance, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
BlackRock Capital Investment Corporation 0 1 0 0 2.00
WhiteHorse Finance 0 0 2 0 3.00

BlackRock Capital Investment Corporation presently has a consensus target price of $8.00, suggesting a potential upside of 12.36%. WhiteHorse Finance has a consensus target price of $13.50, suggesting a potential downside of 4.12%. Given BlackRock Capital Investment Corporation’s higher probable upside, research analysts plainly believe BlackRock Capital Investment Corporation is more favorable than WhiteHorse Finance.

Profitability

This table compares BlackRock Capital Investment Corporation and WhiteHorse Finance’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
BlackRock Capital Investment Corporation -5.04% 7.20% 4.51%
WhiteHorse Finance 62.57% 10.57% 5.99%

Volatility and Risk

BlackRock Capital Investment Corporation has a beta of 0.84, meaning that its stock price is 16% less volatile than the S&P 500. Comparatively, WhiteHorse Finance has a beta of 0.76, meaning that its stock price is 24% less volatile than the S&P 500.

Summary

WhiteHorse Finance beats BlackRock Capital Investment Corporation on 7 of the 12 factors compared between the two stocks.

About BlackRock Capital Investment Corporation

BlackRock Capital Investment Corporation is an externally-managed, non-diversified, closed-end management investment company. The Company’s investment objective is to generate both current income and capital appreciation through its debt and equity investments. The Company provides middle-market companies with a range of financing solutions, including senior and junior secured, unsecured and subordinated debt securities and loans, and equity securities. Its targeted investment typically ranges between $10 million and $50 million. The Company generally seeks to invest in companies that operate in a range of industries. The Company’s investments are in senior and junior secured, unsecured and subordinated loans to the United States private and certain public middle-market companies. The Company’s investment advisor is BlackRock Advisors, LLC.

About WhiteHorse Finance

WhiteHorse Finance, Inc. is a non-diversified, closed-end management investment company. The Company is a direct lender targeting debt investments in privately held, small-cap companies located in the United States. The Company’s investment objective is to generate attractive risk-adjusted returns primarily by originating and investing in senior secured loans, including first lien and second lien facilities, to performing small-cap companies across a range of industries that typically carry a floating interest rate based on the London Interbank Offered Rate (LIBOR) and have a term of 3 to 6 years. The Company may also make investments at other levels of a company’s capital structure, including mezzanine loans or equity interests. The Company also may receive warrants to purchase common stock in connection with its debt investments. Its investment advisor is H.I.G. WhiteHorse Advisers, LLC.

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