Capitala Finance Corp. (NASDAQ: CPTA) and Invesco Bond Fund (NYSE:VBF) are both small-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, risk, earnings, dividends, analyst recommendations, institutional ownership and profitability.

Analyst Ratings

This is a summary of current ratings and recommmendations for Capitala Finance Corp. and Invesco Bond Fund, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Capitala Finance Corp. 0 3 2 0 2.40
Invesco Bond Fund 0 0 0 0 N/A

Capitala Finance Corp. currently has a consensus price target of $13.50, indicating a potential upside of 76.01%. Given Capitala Finance Corp.’s higher possible upside, equities research analysts plainly believe Capitala Finance Corp. is more favorable than Invesco Bond Fund.

Profitability

This table compares Capitala Finance Corp. and Invesco Bond Fund’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Capitala Finance Corp. 3.04% 7.49% 3.19%
Invesco Bond Fund N/A N/A N/A

Dividends

Capitala Finance Corp. pays an annual dividend of $1.00 per share and has a dividend yield of 13.0%. Invesco Bond Fund pays an annual dividend of $0.77 per share and has a dividend yield of 3.9%. Capitala Finance Corp. pays out 909.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Risk & Volatility

Capitala Finance Corp. has a beta of 1.07, meaning that its share price is 7% more volatile than the S&P 500. Comparatively, Invesco Bond Fund has a beta of 0.22, meaning that its share price is 78% less volatile than the S&P 500.

Insider & Institutional Ownership

26.5% of Capitala Finance Corp. shares are owned by institutional investors. Comparatively, 19.8% of Invesco Bond Fund shares are owned by institutional investors. 8.4% of Capitala Finance Corp. shares are owned by company insiders. Comparatively, 1.0% of Invesco Bond Fund shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Valuation and Earnings

This table compares Capitala Finance Corp. and Invesco Bond Fund’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
Capitala Finance Corp. $68.31 million 1.79 $9.15 million $0.11 69.73
Invesco Bond Fund N/A N/A N/A N/A N/A

Capitala Finance Corp. has higher revenue and earnings than Invesco Bond Fund.

Summary

Capitala Finance Corp. beats Invesco Bond Fund on 10 of the 11 factors compared between the two stocks.

Capitala Finance Corp. Company Profile

Capitala Finance Corp. 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 debt and equity investments. Both directly and through its subsidiaries that are licensed by the United States Small Business Administration (SBA), the Company offers financing to business owners, management teams and financial sponsors for change of ownership transactions, recapitalizations, strategic acquisitions, business expansion and other growth initiatives. The Company provides capital to lower and traditional middle-market companies in the United States, with a non-exclusive emphasis on the Southeast, Southwest and Mid-Atlantic regions. The Company invests in first lien, second lien and subordinated loans. The Company’s investment advisor is Capitala Investment Advisors, LLC.

Invesco Bond Fund Company Profile

Invesco Bond Fund is a diversified, closed-end management investment company. The Fund’s investment objective is to seek interest income while conserving capital. The Fund invests primarily in fixed-rate the United States investment-grade corporate bonds with flexibility to integrate approximately 20% of its total assets in non-investment-grade, the United States dollar denominated and non-United States dollar denominated securities of foreign issuers (both developed and emerging markets). The Fund also invests in government securities, asset-backed securities, commercial mortgage-backed securities and residential mortgage-backed securities. The Fund also invests in derivatives and other instruments that have similar economic characteristics to securities, in which it invests. Invesco Advisers, Inc. serves as the investment advisor of the Fund.

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