Great Elm Capital (NASDAQ: GECC) and Hercules Capital (NYSE:HTGC) are both small-cap finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their analyst recommendations, institutional ownership, dividends, risk, earnings, profitability and valuation.

Valuation and Earnings

This table compares Great Elm Capital and Hercules Capital’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Great Elm Capital $5.83 million 18.32 -$17.87 million N/A N/A
Hercules Capital $175.05 million 6.24 $68.70 million $0.91 14.25

Hercules Capital has higher revenue and earnings than Great Elm Capital.

Risk and Volatility

Great Elm Capital has a beta of -0.39, suggesting that its share price is 139% less volatile than the S&P 500. Comparatively, Hercules Capital has a beta of 0.87, suggesting that its share price is 13% less volatile than the S&P 500.

Dividends

Great Elm Capital pays an annual dividend of $1.00 per share and has a dividend yield of 10.0%. Hercules Capital pays an annual dividend of $1.24 per share and has a dividend yield of 9.6%. Hercules Capital pays out 136.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Insider & Institutional Ownership

21.5% of Great Elm Capital shares are owned by institutional investors. Comparatively, 39.3% of Hercules Capital shares are owned by institutional investors. 3.2% of Hercules Capital shares are owned by 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.

Analyst Ratings

This is a summary of recent ratings and price targets for Great Elm Capital and Hercules Capital, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Great Elm Capital 0 1 2 0 2.67
Hercules Capital 0 4 7 0 2.64

Great Elm Capital currently has a consensus target price of $13.33, suggesting a potential upside of 33.20%. Hercules Capital has a consensus target price of $14.33, suggesting a potential upside of 10.45%. Given Great Elm Capital’s stronger consensus rating and higher possible upside, research analysts clearly believe Great Elm Capital is more favorable than Hercules Capital.

Profitability

This table compares Great Elm Capital and Hercules Capital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Great Elm Capital N/A N/A N/A
Hercules Capital 39.73% 12.93% 6.75%

Summary

Hercules Capital beats Great Elm Capital on 9 of the 14 factors compared between the two stocks.

Hercules Capital Company Profile

Hercules Capital, Inc. is a specialty finance company. The Company is an internally managed, non-diversified, closed-end investment company. The Company focuses on providing senior secured venture growth loans to venture capital-backed companies in a range of technology, life sciences, and sustainable and renewable technology industries. The Company’s investment objective is to maximize its portfolio total return by generating current income from its debt investments and capital appreciation from its warrant and equity-related investments. The Company’s primary business objectives are to increase its net income, net operating income and net asset value (NAV) by investing in structured debt with warrants and equity of venture capital-backed companies in technology-related industries with attractive current yields and the potential for equity appreciation and realized gains. The Company focuses its investments in companies active in the technology industry sub-sectors.

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