Contrasting Capital Southwest (NASDAQ:CSWC) & KKR & Co. Inc. (NYSE:KKR)

Capital Southwest (NASDAQ:CSWC) and KKR & Co. Inc. (NYSE:KKR) are both finance companies, but which is the superior business? We will compare the two businesses based on the strength of their profitability, analyst recommendations, dividends, risk, earnings, valuation and institutional ownership.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Capital Southwest and KKR & Co. Inc., as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Capital Southwest	1	3	6	0	2.50
KKR & Co. Inc.	0	5	10	1	2.75

Capital Southwest presently has a consensus target price of $23.64, suggesting a potential upside of 7.03%. KKR & Co. Inc. has a consensus target price of $156.31, suggesting a potential upside of 20.14%. Given KKR & Co. Inc.’s stronger consensus rating and higher probable upside, analysts clearly believe KKR & Co. Inc. is more favorable than Capital Southwest.

Profitability

This table compares Capital Southwest and KKR & Co. Inc.’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Capital Southwest	39.79%	13.64%	6.44%
KKR & Co. Inc.	13.84%	6.12%	1.06%

Valuation & Earnings

This table compares Capital Southwest and KKR & Co. Inc.”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Capital Southwest	$132.24 million	9.60	$70.55 million	$1.61	13.72
KKR & Co. Inc.	$21.88 billion	5.30	$3.08 billion	$2.36	55.13

KKR & Co. Inc. has higher revenue and earnings than Capital Southwest. Capital Southwest is trading at a lower price-to-earnings ratio than KKR & Co. Inc., indicating that it is currently the more affordable of the two stocks.

Dividends

Capital Southwest pays an annual dividend of $2.32 per share and has a dividend yield of 10.5%. KKR & Co. Inc. pays an annual dividend of $0.74 per share and has a dividend yield of 0.6%. Capital Southwest pays out 144.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. KKR & Co. Inc. pays out 31.4% of its earnings in the form of a dividend. Capital Southwest has raised its dividend for 2 consecutive years and KKR & Co. Inc. has raised its dividend for 5 consecutive years.

Insider & Institutional Ownership

23.4% of Capital Southwest shares are owned by institutional investors. Comparatively, 76.3% of KKR & Co. Inc. shares are owned by institutional investors. 2.8% of Capital Southwest shares are owned by insiders. Comparatively, 39.3% of KKR & Co. Inc. shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Risk & Volatility

Capital Southwest has a beta of 0.76, suggesting that its stock price is 24% less volatile than the S&P 500. Comparatively, KKR & Co. Inc. has a beta of 1.99, suggesting that its stock price is 99% more volatile than the S&P 500.

Summary

KKR & Co. Inc. beats Capital Southwest on 13 of the 18 factors compared between the two stocks.

About Capital Southwest

Capital Southwest Corporation is a business development company specializing in credit and private equity and venture capital investments in middle market companies, mezzanine, later stage, mature, late venture, emerging growth, buyouts, industry consolidation, recapitalizations and growth capital investments. It does not invest in startups, publicly traded companies, real estate developments, project finance opportunities, oil and gas exploration businesses, troubled companies, turnarounds, and companies in which significant senior management is departing. In lower middle market, the firm typically invests in growth financing, bolt-on acquisitions, new platform acquisitions, refinancing, dividend recapitalizations, sponsor-led buyouts, and management buyouts situations. The investment structures are Unitranche debt, subordinated debt, senior debt, first and second lien debt, and preferred and common equity. The firm makes equity co-investments alongside debt investments, up to 20% of total check and only makes non-control investments. The firm is Industry agnostic, but it prefers to invest in Industrial manufacturing and services, value-added distribution, healthcare products and services, business services, specialty chemicals, food and beverage, tech-enabled services and SaaS models. The firm seeks to invest in energy services and products, industrial technologies, and specialty chemicals and products. Within energy services and products, the firm seeks to invest in each segment of the industry, including upstream, midstream and downstream, excluding exploration and production with a focus on differentiated products and services, equipment and tool rental, consumable products, and drilling and completion chemicals. Within industrial technologies, it seeks to invest in automation and process controls, handling and packaging equipment, industrial filtration and fluid handling, measurement, monitoring and testing, professional tools, and sensors and instrumentation. Within and specialty chemicals and products, the firm seeks to invest in businesses that develop and manufacture highly differentiated chemicals and products including adhesives, coatings and sealants, catalysts and absorbents, cosmeceuticals, fine chemicals, flavors and fragrances, performance lubricants, polymers, plastics and composites, chemical dispensing and filtration equipment, professional and industrial trade consumables and tools, engineered solutions for HVAC, plumbing, and electrical installations, specified high performance materials for fire protection and oilfield applications. It may also invest in exceptional opportunities in building products. The firm seeks to invest in the United States and North America. The firm seeks to make investments ranging from $5 million and $25 million in securities. It leads $5 to $70 million financings, Its Target holds of $5 million and $45 million, and the firm is willing to backstop up to $55mm with an active network of co-investors. It seeks to invest in the firm with minimum EBITDA is $3 million and $25 million. In addition to making direct investments, the firm allocates capital to syndicated first and second lien term loans in the upper middle market. Criteria for Upper Middle Market Syndicated 1st Lien is EBITDA Size more than $30 million, Closing Leverage greater than 4 times, investment hold size between $5 million and $7 million up to $15mm with senior loan fund, investment yield greater than 6.5%. Criteria for Upper Middle Market Syndicated 2nd Lien is EBITDA Size more than $50 million, Closing Leverage greater than 6 times, investment hold size between $5 million and $7 million, investment yield greater than 9%. It prefers to take a majority and minority stake. The firm has the flexibility to hold investments for very long period in its portfolio companies. It may also invest through warrants. The firm prefers to take Board participation in its portfolio companies. Capital Southwest Corporation was founded on April 19, 1961 and is based in Dallas, Texas.

About KKR & Co. Inc.

KKR & Co., Inc. operates as an investment firm. It offers alternative asset management as well as capital markets and insurance solutions. The firm’s business segments include Asset Management and Insurance Business. The Asset Management segment engages in providing private equity, real assets, credit and liquid strategies, capital markets, and principal activities. The Insurance Business segment offers retirement, life insurance and reinsurance solutions to clients across individual and institutional markets. The company was founded by Henry Kravis, George R. Roberts, and Jerome Kholberg on May 1, 1976 and is headquartered in New York, NY.