Horizon Technology Finance Corporation (NASDAQ: HRZN) and American Capital Senior Floating (NASDAQ:ACSF) are both small-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their risk, dividends, profitability, analyst recommendations, valuation, institutional ownership and earnings.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Horizon Technology Finance Corporation and American Capital Senior Floating, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Horizon Technology Finance Corporation 1 3 1 0 2.00
American Capital Senior Floating 0 0 0 0 N/A

Horizon Technology Finance Corporation presently has a consensus target price of $10.75, indicating a potential upside of 2.38%. Given Horizon Technology Finance Corporation’s higher possible upside, equities research analysts plainly believe Horizon Technology Finance Corporation is more favorable than American Capital Senior Floating.

Risk and Volatility

Horizon Technology Finance Corporation has a beta of 0.81, suggesting that its stock price is 19% less volatile than the S&P 500. Comparatively, American Capital Senior Floating has a beta of 1.3, suggesting that its stock price is 30% more volatile than the S&P 500.

Profitability

This table compares Horizon Technology Finance Corporation and American Capital Senior Floating’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Horizon Technology Finance Corporation -6.72% 10.24% 6.29%
American Capital Senior Floating 119.98% 6.97% 3.69%

Dividends

Horizon Technology Finance Corporation pays an annual dividend of $1.20 per share and has a dividend yield of 11.4%. American Capital Senior Floating pays an annual dividend of $1.16 per share and has a dividend yield of 10.2%. Horizon Technology Finance Corporation pays out -750.0% of its earnings in the form of a dividend. American Capital Senior Floating pays out 37.3% 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. Horizon Technology Finance Corporation is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares Horizon Technology Finance Corporation and American Capital Senior Floating’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Horizon Technology Finance Corporation N/A N/A N/A ($0.16) -65.62
American Capital Senior Floating N/A N/A N/A $3.11 3.65

Horizon Technology Finance Corporation is trading at a lower price-to-earnings ratio than American Capital Senior Floating, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

18.2% of Horizon Technology Finance Corporation shares are owned by institutional investors. Comparatively, 31.0% of American Capital Senior Floating shares are owned by institutional investors. 1.3% of Horizon Technology Finance Corporation shares are owned by insiders. Comparatively, 0.2% of American Capital Senior Floating shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Summary

Horizon Technology Finance Corporation beats American Capital Senior Floating on 7 of the 12 factors compared between the two stocks.

Horizon Technology Finance Corporation Company Profile

Horizon Technology Finance Corporation is an externally managed, closed-end, non-diversified management investment company. The Company’s investment objective is to maximize investment portfolio’s total return by generating current income from the debt investments it makes and capital appreciation from the warrants it receives when making such debt investments. It lends to and invests in development-stage companies in the technology, life science, healthcare information and services and cleantech industries (collectively Target Industries). It is focused on making secured debt investments (Venture Loans) to venture capital backed companies in its Target Industries. As of December 31, 2016, its debt investment portfolio consisted of 44 debt investments. As of December 31, 2016, the Company held warrants to purchase stock, predominantly preferred stock, in 78 portfolio companies, equity positions in five portfolio companies and success fee arrangements in 11 portfolio companies.

American Capital Senior Floating Company Profile

American Capital Senior Floating, Ltd. is a non-diversified closed-end investment management company. The Company’s investment objective is to provide attractive, risk-adjusted returns over the long term primarily through current income while seeking to preserve its capital. It manages a leveraged portfolio composed primarily of diversified investments in first lien and second lien floating rate loans principally to the United States-based companies (collectively, Senior Floating Rate Loans or SFRLs), which are referred to as leveraged loans. It invests in equity tranches of collateralized loan obligations (CLOs), which are securitized vehicles collateralized primarily by SFRLs, and it may invest in debt tranches of CLOs. In addition, it may selectively invest in loans issued by middle market companies, mezzanine and unitranche loans and high yield bonds. It has over 80% of its assets in Senior Floating Rate Loans. The Company is managed by American Capital ACSF Management, LLC.

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