Critical Comparison: Crescent Capital BDC (NASDAQ:CCAP) versus Sixth Street Specialty Lending (NYSE:TSLX)

Crescent Capital BDC (NASDAQ:CCAP) and Sixth Street Specialty Lending (NYSE:TSLX) are both small-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, dividends, analyst recommendations, earnings, risk, profitability and valuation.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Crescent Capital BDC and Sixth Street Specialty Lending, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Crescent Capital BDC	1	3	2	0	2.17
Sixth Street Specialty Lending	1	2	5	0	2.50

Crescent Capital BDC presently has a consensus target price of $14.30, indicating a potential upside of 25.77%. Sixth Street Specialty Lending has a consensus target price of $19.83, indicating a potential upside of 15.55%. Given Crescent Capital BDC’s higher possible upside, equities analysts plainly believe Crescent Capital BDC is more favorable than Sixth Street Specialty Lending.

Profitability

This table compares Crescent Capital BDC and Sixth Street Specialty Lending’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Crescent Capital BDC	9.26%	9.34%	4.04%
Sixth Street Specialty Lending	25.25%	11.92%	5.54%

Institutional & Insider Ownership

49.5% of Crescent Capital BDC shares are owned by institutional investors. Comparatively, 70.3% of Sixth Street Specialty Lending shares are owned by institutional investors. 1.2% of Crescent Capital BDC shares are owned by insiders. Comparatively, 3.8% of Sixth Street Specialty Lending 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.

Valuation and Earnings

This table compares Crescent Capital BDC and Sixth Street Specialty Lending”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Crescent Capital BDC	$167.29 million	2.50	$34.51 million	$0.41	27.73
Sixth Street Specialty Lending	$449.05 million	3.63	$209.99 million	$1.15	14.93

Sixth Street Specialty Lending has higher revenue and earnings than Crescent Capital BDC. Sixth Street Specialty Lending is trading at a lower price-to-earnings ratio than Crescent Capital BDC, indicating that it is currently the more affordable of the two stocks.

Risk & Volatility

Crescent Capital BDC has a beta of 0.59, meaning that its share price is 41% less volatile than the S&P 500. Comparatively, Sixth Street Specialty Lending has a beta of 0.65, meaning that its share price is 35% less volatile than the S&P 500.

Dividends

Crescent Capital BDC pays an annual dividend of $1.68 per share and has a dividend yield of 14.8%. Sixth Street Specialty Lending pays an annual dividend of $1.84 per share and has a dividend yield of 10.7%. Crescent Capital BDC pays out 409.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Sixth Street Specialty Lending pays out 160.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Crescent Capital BDC has increased its dividend for 1 consecutive years. Crescent Capital BDC is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Sixth Street Specialty Lending beats Crescent Capital BDC on 13 of the 17 factors compared between the two stocks.

About Crescent Capital BDC

Crescent Capital BDC, Inc. is as a business development company private equity / buyouts and loan fund. It specializes in directly investing. It specializes in middle market. The fund seeks to invest in United States.

About Sixth Street Specialty Lending

Sixth Street Specialty Lending, Inc. (NYSE: TSLX) is a business development company. The fund provides senior secured loans (first-lien, second-lien, and unitranche), unsecured loans, mezzanine debt, and investments in corporate bonds and equity securities and structured products, non-control structured equity, and common equity with a focus on co-investments for organic growth, acquisitions, market or product expansion, restructuring initiatives, recapitalizations, and refinancing. The fund invests in business services, software & technology, healthcare, energy, consumer & retail, manufacturing, industrials, royalty related businesses, education, and specialty finance. It seeks to finance and lending to middle market companies principally located in the United States. The fund invests in companies with enterprise value between $50 million and $1 billion or more and EBITDA between $10 million and $250 million. The transaction size is between $15 million and $350 million. The fund invests across the spectrum of the capital structure and can arrange syndicated transactions of up to $500 million and hold sizeable positions within its credits.