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

Dividends

Great Elm Capital pays an annual dividend of $1.00 per share and has a dividend yield of 11.6%. Pzena Investment Management pays an annual dividend of $0.12 per share and has a dividend yield of 1.5%. Great Elm Capital pays out 69.4% of its earnings in the form of a dividend. Pzena Investment Management pays out 15.6% 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.

Risk & Volatility

Great Elm Capital has a beta of 0.71, indicating that its stock price is 29% less volatile than the S&P 500. Comparatively, Pzena Investment Management has a beta of 1.18, indicating that its stock price is 18% more volatile than the S&P 500.

Earnings & Valuation

This table compares Great Elm Capital and Pzena Investment Management’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Great Elm Capital $27.75 million 3.22 -$9.01 million $1.44 6.00
Pzena Investment Management $153.58 million 3.68 $13.79 million $0.77 10.42

Pzena Investment Management has higher revenue and earnings than Great Elm Capital. Great Elm Capital is trading at a lower price-to-earnings ratio than Pzena Investment Management, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a summary of current ratings for Great Elm Capital and Pzena Investment Management, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Great Elm Capital 0 0 0 0 N/A
Pzena Investment Management 0 0 0 0 N/A

Profitability

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

Net Margins Return on Equity Return on Assets
Great Elm Capital 11.68% 11.94% 4.97%
Pzena Investment Management 8.81% 14.74% 8.46%

Insider and Institutional Ownership

15.2% of Great Elm Capital shares are owned by institutional investors. Comparatively, 16.6% of Pzena Investment Management shares are owned by institutional investors. 1.4% of Great Elm Capital shares are owned by insiders. Comparatively, 53.4% of Pzena Investment Management shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Summary

Pzena Investment Management beats Great Elm Capital on 10 of the 13 factors compared between the two stocks.

About Great Elm Capital

Great Elm Capital Corporation is a business development company which specializes in loan and mezzanine, middle market investments. The fund prefers to invest in media, commercial services and supplies, healthcare, telecommunication services, communications equipment. It typically makes equity investments between $3 million and $10 million in companies with revenues between $3 million and $75 million.

About Pzena Investment Management

Pzena Investment Management, Inc. is a publicly owned investment manager. The firm manages equity mutual funds for its clients. It invests in the public equity markets. Pzena Investment Management, Inc. was founded in 2007 and is based in New York City with additional offices in Melbourne, Australia and London, United Kingdom.

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