Critical Contrast: Nuveen Churchill Direct Lending (NYSE:NCDL) vs. Saratoga Investment (NYSE:SAR)

Saratoga Investment (NYSE:SAR) and Nuveen Churchill Direct Lending (NYSE:NCDL) are both small-cap finance companies, but which is the superior investment? We will compare the two companies based on the strength of their profitability, earnings, dividends, risk, analyst recommendations, valuation and institutional ownership.

Analyst Recommendations

This is a breakdown of current ratings and price targets for Saratoga Investment and Nuveen Churchill Direct Lending, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Saratoga Investment	0	6	0	0	2.00
Nuveen Churchill Direct Lending	0	4	1	0	2.20

Saratoga Investment currently has a consensus price target of $23.63, suggesting a potential upside of 2.77%. Nuveen Churchill Direct Lending has a consensus price target of $15.75, suggesting a potential upside of 11.60%. Given Nuveen Churchill Direct Lending’s stronger consensus rating and higher probable upside, analysts plainly believe Nuveen Churchill Direct Lending is more favorable than Saratoga Investment.

Insider & Institutional Ownership

19.1% of Saratoga Investment shares are owned by institutional investors. 10.0% of Saratoga Investment shares are owned by insiders. Comparatively, 0.6% of Nuveen Churchill Direct Lending shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Dividends

Saratoga Investment pays an annual dividend of $3.00 per share and has a dividend yield of 13.0%. Nuveen Churchill Direct Lending pays an annual dividend of $1.80 per share and has a dividend yield of 12.8%. Saratoga Investment pays out 123.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Nuveen Churchill Direct Lending pays out 117.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Valuation & Earnings

This table compares Saratoga Investment and Nuveen Churchill Direct Lending”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Saratoga Investment	$148.85 million	2.50	$28.09 million	$2.44	9.42
Nuveen Churchill Direct Lending	$224.04 million	3.11	$116.32 million	$1.53	9.22

Nuveen Churchill Direct Lending has higher revenue and earnings than Saratoga Investment. Nuveen Churchill Direct Lending is trading at a lower price-to-earnings ratio than Saratoga Investment, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Saratoga Investment and Nuveen Churchill Direct Lending’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Saratoga Investment	30.61%	9.19%	3.09%
Nuveen Churchill Direct Lending	36.83%	11.13%	4.83%

Volatility & Risk

Saratoga Investment has a beta of 0.56, indicating that its share price is 44% less volatile than the S&P 500. Comparatively, Nuveen Churchill Direct Lending has a beta of 0.4, indicating that its share price is 60% less volatile than the S&P 500.

Summary

Nuveen Churchill Direct Lending beats Saratoga Investment on 10 of the 16 factors compared between the two stocks.

About Saratoga Investment

Saratoga Investment Corp. is a business development company specializing in leveraged and management buyouts, acquisition financings, growth financings, recapitalization, debt refinancing, and transitional financing transactions at the lower end of middle market companies. It structures its investments as debt and equity by investing through first and second lien loans, mezzanine debt, co-investments, select high yield bonds, senior secured bonds, unsecured bonds, and preferred and common equity. The firm prefers to invest in aerospace, automotive aftermarket and services, business products and services, consumer products and services, education, environmental services, industrial services, financial services, food and beverage, healthcare products and services, logistics, distribution, manufacturing, restaurants services, food services, software services, technology services, specialty chemical, media and telecommunications. It seeks to invest in the United States. The firm primarily invests $5 million to $50 million in companies having EBITDA of $2 million or greater and revenues of $8 million to $250 million. The firm prefer to take a majority stake. It invests through direct lending as well as participation in loan syndicates. The firm was formerly known as GSC Investment Corp. Saratoga Investment Corp. was formed on 2007 and is based in New York, New York with an additional office in Florham Park, New Jersey.

About Nuveen Churchill Direct Lending

Nuveen Churchill Direct Lending Corp. is a specialty finance company focused primarily on investing in senior secured loans to private equity-owned U.S. middle market companies. It has elected to be regulated as a business development company. Nuveen Churchill Direct Lending Corp. is based in NEW YORK.