Palmer Square Capital BDC (NYSE:PSBD) and Bain Capital Specialty Finance (NYSE:BCSF) Critical Analysis

Palmer Square Capital BDC (NYSE:PSBD) and Bain Capital Specialty Finance (NYSE:BCSF) are both small-cap finance companies, but which is the better stock? We will compare the two businesses based on the strength of their profitability, earnings, analyst recommendations, dividends, risk, institutional ownership and valuation.

Risk & Volatility

Palmer Square Capital BDC has a beta of 0.87, meaning that its share price is 13% less volatile than the S&P 500. Comparatively, Bain Capital Specialty Finance has a beta of 0.59, meaning that its share price is 41% less volatile than the S&P 500.

Insider & Institutional Ownership

6.5% of Palmer Square Capital BDC shares are held by institutional investors. 1.1% of Palmer Square Capital BDC shares are held by company insiders. Comparatively, 0.6% of Bain Capital Specialty Finance shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Valuation & Earnings

This table compares Palmer Square Capital BDC and Bain Capital Specialty Finance”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Palmer Square Capital BDC	-$27.75 million	-12.21	-$3.17 million	($1.04)	-10.47
Bain Capital Specialty Finance	$88.67 million	9.78	$98.76 million	$1.14	11.73

Bain Capital Specialty Finance has higher revenue and earnings than Palmer Square Capital BDC. Palmer Square Capital BDC is trading at a lower price-to-earnings ratio than Bain Capital Specialty Finance, indicating that it is currently the more affordable of the two stocks.

Dividends

Palmer Square Capital BDC pays an annual dividend of $1.44 per share and has a dividend yield of 13.2%. Bain Capital Specialty Finance pays an annual dividend of $1.68 per share and has a dividend yield of 12.6%. Palmer Square Capital BDC pays out -138.5% of its earnings in the form of a dividend. Bain Capital Specialty Finance pays out 147.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Bain Capital Specialty Finance has increased its dividend for 4 consecutive years. Palmer Square Capital BDC is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Palmer Square Capital BDC and Bain Capital Specialty Finance’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Palmer Square Capital BDC	-26.82%	11.01%	4.14%
Bain Capital Specialty Finance	27.00%	10.44%	4.35%

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Palmer Square Capital BDC and Bain Capital Specialty Finance, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Palmer Square Capital BDC	0	3	0	0	2.00
Bain Capital Specialty Finance	0	2	1	0	2.33

Palmer Square Capital BDC currently has a consensus price target of $11.00, suggesting a potential upside of 1.01%. Bain Capital Specialty Finance has a consensus price target of $14.00, suggesting a potential upside of 4.71%. Given Bain Capital Specialty Finance’s stronger consensus rating and higher probable upside, analysts clearly believe Bain Capital Specialty Finance is more favorable than Palmer Square Capital BDC.

Summary

Bain Capital Specialty Finance beats Palmer Square Capital BDC on 11 of the 17 factors compared between the two stocks.

About Palmer Square Capital BDC

Palmer Square Capital BDC Inc. is an externally managed, non-diversified closed-end management investment company which primarily lends to and invests in corporate debt securities, including small to large private U.S. companies and has elected to be regulated as a business development company. Palmer Square Capital BDC Inc. is based in MISSION WOODS, Kan.

About Bain Capital Specialty Finance

Bain Capital Specialty Finance, Inc. is business development company specializing in direct loans to middle-market companies. The fund seeks to invest in senior investments with a first or second lien on collateral, senior first lien, stretch senior, senior second lien, unitranche, mezzanine debt, junior securities, other junior investments, and secondary purchases of assets or portfolios that primarily consist of middle-market corporate debt. It typically invests in companies with EBITDA between $10 million and $150 million.