Contrasting Runway Growth Finance (NASDAQ:RWAY) & Rand Capital (NASDAQ:RAND)

Rand Capital (NASDAQ:RAND) and Runway Growth Finance (NASDAQ:RWAY) are both small-cap finance companies, but which is the better business? We will compare the two companies based on the strength of their analyst recommendations, risk, earnings, profitability, dividends, valuation and institutional ownership.

Analyst Ratings

This is a breakdown of recent ratings and price targets for Rand Capital and Runway Growth Finance, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Rand Capital	1	0	0	0	1.00
Runway Growth Finance	0	4	3	0	2.43

Runway Growth Finance has a consensus price target of $11.10, suggesting a potential upside of 24.58%. Given Runway Growth Finance’s stronger consensus rating and higher possible upside, analysts clearly believe Runway Growth Finance is more favorable than Rand Capital.

Institutional and Insider Ownership

64.6% of Runway Growth Finance shares are owned by institutional investors. 68.2% of Rand Capital shares are owned by company insiders. Comparatively, 1.0% of Runway Growth Finance shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Volatility and Risk

Rand Capital has a beta of 0.31, indicating that its share price is 69% less volatile than the S&P 500. Comparatively, Runway Growth Finance has a beta of 0.67, indicating that its share price is 33% less volatile than the S&P 500.

Dividends

Rand Capital pays an annual dividend of $1.16 per share and has a dividend yield of 9.9%. Runway Growth Finance pays an annual dividend of $1.32 per share and has a dividend yield of 14.8%. Rand Capital pays out -27.6% of its earnings in the form of a dividend. Runway Growth Finance pays out 89.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Profitability

This table compares Rand Capital and Runway Growth Finance’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Rand Capital	-164.74%	7.12%	6.80%
Runway Growth Finance	38.92%	11.94%	5.80%

Earnings & Valuation

This table compares Rand Capital and Runway Growth Finance”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Rand Capital	$8.56 million	4.08	$8.83 million	($4.20)	-2.80
Runway Growth Finance	$144.63 million	2.23	$73.61 million	$1.47	6.06

Runway Growth Finance has higher revenue and earnings than Rand Capital. Rand Capital is trading at a lower price-to-earnings ratio than Runway Growth Finance, indicating that it is currently the more affordable of the two stocks.

Summary

Runway Growth Finance beats Rand Capital on 12 of the 16 factors compared between the two stocks.

About Rand Capital

Rand Capital Corporation is a business development company specializing in subordinated debt with warrants or preferred equity and venture capital investments. Within private equity, the firm specializing in capital growth and lower middle market investments. Within venture capital, it specializing in early to late-stage private businesses. It does not prefer to invest in real estate sector. It prefers to invest in software, professional services, manufacturing, consumer, healthcare, automotive and public d stocks. It prefers to invest in East or Midwest U.S. operations sectors. It typically invests between $0.75 million and $5 million with initial target size of $1.5 million. It seeks to invest in companies having more than $2 million in revenue or having excess of $1.5 million and up to $5 million in EBITDA. It prefers to be a minority stake and seeks to take a Board seat in its portfolio companies. It typically holds its investments for a period up to five years.

About Runway Growth Finance

Runway Growth Finance Corp. is a business development company specializing investments in senior-secured loans to late stage and growth companies. It prefers to make investments in companies engaged in the technology, life sciences, healthcare and information services, business services and select consumer services and products sectors. It prefers to investments in companies engaged in electronic equipment and instruments, systems software, hardware, storage and peripherals and specialized consumer services, application software, healthcare technology, internet software and services, data processing and outsourced services, internet retail, human resources and employment services, biotechnology, healthcare equipment and education services. It invests in senior secured loans between $10 million and $75 million.