Analyzing Oaktree Specialty Lending (NASDAQ:OCSL) & Barings Bdc (NYSE:BBDC)

Oaktree Specialty Lending (NASDAQ:OCSL) and Barings Bdc (NYSE:BBDC) are both small-cap finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their analyst recommendations, earnings, institutional ownership, risk, valuation, dividends and profitability.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Oaktree Specialty Lending and Barings Bdc, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Oaktree Specialty Lending	0	6	0	0	2.00
Barings Bdc	0	4	1	0	2.20

Oaktree Specialty Lending presently has a consensus target price of $11.83, suggesting a potential downside of 9.84%. Barings Bdc has a consensus target price of $9.75, suggesting a potential upside of 9.12%. Given Barings Bdc’s stronger consensus rating and higher probable upside, analysts plainly believe Barings Bdc is more favorable than Oaktree Specialty Lending.

Valuation & Earnings

This table compares Oaktree Specialty Lending and Barings Bdc”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Oaktree Specialty Lending	$316.80 million	3.65	$33.92 million	$0.48	27.34
Barings Bdc	$279.21 million	3.35	$101.92 million	$0.83	10.77

Barings Bdc has lower revenue, but higher earnings than Oaktree Specialty Lending. Barings Bdc is trading at a lower price-to-earnings ratio than Oaktree Specialty Lending, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Oaktree Specialty Lending and Barings Bdc’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Oaktree Specialty Lending	14.45%	9.70%	4.64%
Barings Bdc	32.73%	10.07%	4.38%

Insider and Institutional Ownership

36.8% of Oaktree Specialty Lending shares are owned by institutional investors. Comparatively, 44.1% of Barings Bdc shares are owned by institutional investors. 0.3% of Oaktree Specialty Lending shares are owned by company insiders. Comparatively, 0.6% of Barings Bdc shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Volatility and Risk

Oaktree Specialty Lending has a beta of 0.5, indicating that its share price is 50% less volatile than the S&P 500. Comparatively, Barings Bdc has a beta of 0.6, indicating that its share price is 40% less volatile than the S&P 500.

Dividends

Oaktree Specialty Lending pays an annual dividend of $1.20 per share and has a dividend yield of 9.1%. Barings Bdc pays an annual dividend of $1.04 per share and has a dividend yield of 11.6%. Oaktree Specialty Lending pays out 250.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Barings Bdc pays out 125.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Barings Bdc has raised its dividend for 3 consecutive years. Barings Bdc is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Barings Bdc beats Oaktree Specialty Lending on 13 of the 17 factors compared between the two stocks.

About Oaktree Specialty Lending

Oaktree Specialty Lending Corporation is a business development company. The fund specializing in investments in middle market, bridge financing, first and second lien debt financing, unsecured and mezzanine loan, mezzanine debt, senior and junior secured debt, expansions, sponsor-led acquisitions, preferred equity, and management buyouts in small and mid-sized companies. It seeks to invest in education services, business services, retail and consumer, healthcare, manufacturing, food and restaurants, construction and engineering. The firm also seeks investment in media, advertising sectors, software, IT services, pharmaceuticals, biotechnology, real estate management and development, chemicals, machinery, and internet and direct marketing retail sectors. It invests between $5 million to $75 million principally in the form of one-stop, first lien, and second lien debt investments, which may include an equity co-investment component in companies. The firm invest in companies having enterprise value between $20 million and $150 million and EBITDA between $3 million and $50 million. The fund has a hold size of up to $75 million and may underwrite transactions up to $100 million. It primarily invests in North America. The fund seeks to be a lead investor in its portfolio companies.

About Barings Bdc

Barings BDC, Inc. is a publicly traded, externally managed investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. It seeks to invest primarily in senior secured loans, first lien debt, unitranche, second lien debt, subordinated debt, equity co-investments and senior secured private debt investments in private middle-market companies that operate across a wide range of industries. It specializes in mezzanine, leveraged buyouts, management buyouts, ESOPs, change of control transactions, acquisition financings, growth financing, and recapitalizations in lower middle market, mature, and later stage companies. It invests in manufacturing and distribution; business services and technology; transportation and logistics; consumer product and services. It invests in United States. It invests in companies with EBITDA of $10 million to $75 million, typically in private equity sponsor backed.