Apollo Investment Corporation (NASDAQ: AINV) and Solar Senior Capital (NASDAQ:SUNS) are both small-cap finance companies, but which is the better investment? We will compare the two companies based on the strength of their dividends, profitability, institutional ownership, risk, analyst recommendations, earnings and valuation.

Risk and Volatility

Apollo Investment Corporation has a beta of 0.92, indicating that its share price is 8% less volatile than the S&P 500. Comparatively, Solar Senior Capital has a beta of 0.63, indicating that its share price is 37% less volatile than the S&P 500.

Insider & Institutional Ownership

45.8% of Apollo Investment Corporation shares are owned by institutional investors. Comparatively, 32.8% of Solar Senior Capital shares are owned by institutional investors. 0.3% of Apollo Investment Corporation shares are owned by company insiders. Comparatively, 5.6% of Solar Senior Capital shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current ratings for Apollo Investment Corporation and Solar Senior Capital, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Apollo Investment Corporation 1 4 1 0 2.00
Solar Senior Capital 0 1 2 0 2.67

Apollo Investment Corporation presently has a consensus target price of $6.33, indicating a potential upside of 5.38%. Solar Senior Capital has a consensus target price of $17.17, indicating a potential downside of 1.11%. Given Apollo Investment Corporation’s higher possible upside, equities research analysts clearly believe Apollo Investment Corporation is more favorable than Solar Senior Capital.

Profitability

This table compares Apollo Investment Corporation and Solar Senior Capital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Apollo Investment Corporation 33.04% 9.75% 5.75%
Solar Senior Capital 76.07% 7.98% 4.22%

Dividends

Apollo Investment Corporation pays an annual dividend of $0.60 per share and has a dividend yield of 10.0%. Solar Senior Capital pays an annual dividend of $1.41 per share and has a dividend yield of 8.1%. Apollo Investment Corporation pays out 150.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Solar Senior Capital pays out 94.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Earnings & Valuation

This table compares Apollo Investment Corporation and Solar Senior Capital’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Apollo Investment Corporation N/A N/A N/A $0.40 15.03
Solar Senior Capital N/A N/A N/A $1.49 11.65

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

Summary

Solar Senior Capital beats Apollo Investment Corporation on 7 of the 13 factors compared between the two stocks.

About Apollo Investment Corporation

Apollo Investment Corporation is a closed-end, externally managed, non-diversified management investment company. The Company’s investment objective is to generate current income and capital appreciation. It invests primarily in various forms of debt investments, including secured and unsecured debt, loan investments and/or equity in private middle-market companies. It may also invest in the securities of public companies and in structured products and other investments, such as collateralized loan obligations (CLOs) and credit-linked notes (CLNs). Its portfolio also includes equity interests, such as common stock, preferred stock, warrants or options. It invests in investments in the United States secured and unsecured loans, other debt securities and equity, and may also invests a portion of the portfolio in other investment opportunities, including foreign securities and structured products. Apollo Investment Management, L.P. is the investment advisor of the Company.

About Solar Senior Capital

Solar Senior Capital Ltd. is a closed-end, externally managed, non-diversified management investment company. The Company’s investment objective is to seek to maximize current income consistent with the preservation of capital. The Company seeks to achieve its investment objective by directly and indirectly investing in senior loans, including first lien, unitranche, and second lien debt instruments, made to private middle-market companies whose debt is rated below investment grade, which it refers to collectively as senior loans. It may also invest in debt of public companies that are thinly traded or in equity securities. Under normal market conditions, at least 80% of the value of its net assets (including the amount of any borrowings for investment purposes) will be invested in senior loans. It invests in privately held the United States middle-market companies. Its investment activities are managed by Solar Capital Partners, LLC (Solar Capital Partners or the Investment Advisor).

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