Head-To-Head Review: Fidus Investment (NASDAQ:FDUS) and OFS Capital (NASDAQ:OFS)

OFS Capital (NASDAQ:OFS) and Fidus Investment (NASDAQ:FDUS) are both finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their valuation, analyst recommendations, earnings, institutional ownership, profitability, risk and dividends.

Analyst Ratings

This is a breakdown of recent ratings and price targets for OFS Capital and Fidus Investment, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
OFS Capital	0	0	0	0	0.00
Fidus Investment	0	1	0	2	3.33

Fidus Investment has a consensus target price of $21.00, indicating a potential downside of 3.85%. Given Fidus Investment’s stronger consensus rating and higher possible upside, analysts plainly believe Fidus Investment is more favorable than OFS Capital.

Dividends

OFS Capital pays an annual dividend of $1.36 per share and has a dividend yield of 16.0%. Fidus Investment pays an annual dividend of $1.72 per share and has a dividend yield of 7.9%. OFS Capital pays out 60.4% of its earnings in the form of a dividend. Fidus Investment pays out 73.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. OFS Capital has increased its dividend for 3 consecutive years. OFS Capital is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional & Insider Ownership

10.8% of OFS Capital shares are owned by institutional investors. Comparatively, 28.1% of Fidus Investment shares are owned by institutional investors. 0.5% of OFS Capital shares are owned by company insiders. Comparatively, 1.4% of Fidus Investment 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.

Earnings and Valuation

This table compares OFS Capital and Fidus Investment”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
OFS Capital	$47.96 million	N/A	$28.44 million	$2.25	3.77
Fidus Investment	$146.15 million	5.19	$78.29 million	$2.34	9.33

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

Risk and Volatility

OFS Capital has a beta of 1.31, meaning that its share price is 31% more volatile than the S&P 500. Comparatively, Fidus Investment has a beta of 0.92, meaning that its share price is 8% less volatile than the S&P 500.

Profitability

This table compares OFS Capital and Fidus Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
OFS Capital	68.61%	9.14%	3.50%
Fidus Investment	52.59%	11.48%	6.43%

Summary

Fidus Investment beats OFS Capital on 11 of the 16 factors compared between the two stocks.

About OFS Capital

OFS Capital Corporation is a business development company specializing in direct and fund investments as well as add-on acquisitions. It provides flexible capital solutions primarily through debt capital and to a lesser extent, minority equity investments serving the needs of U.S.-based middle-market companies across a broad array of industries. It does not invest in operational turnarounds or start-up businesses. For direct, it specializes in debt and structured equity investments, recapitalizations and refinancing, management and leveraged buyouts, acquisition financings, ownership transition, shareholder liquidity events, growth capital, independent sponsor transactions, ESOPs, and minority investments in the lower middle market companies. It invests in the aerospace and defense, business services, consumer products and services, construction & building, durable goods, capital equipment, automotive, food and beverage, healthcare & pharmaceutical, specialty chemicals, transportation cargo and logistics, value added distribution, franchising, and industrial and niche manufacturing sectors. The firm invests in companies based in United States. It seeks to invest between $3 million and $35 million, revenues between $15 million and $300 million, annual EBITDA between $5 million and $50 million, and Enterprise value between $10 million and $500 million. The firm seeks to invest in companies with debt investment values between $5 million and $25 million. The fund uses senior secured, unitranche loans, first-lien, second lien, subordinated/ mezzanine loans, warrants, and preferred equity securities and common equity securities. It prefers to take a minority as well as majority stake in the investments made. It also co-invests with its partners for additional capital.

About Fidus Investment

Fidus Investment Corporation is a business development company. It specializing in leveraged buyouts, refinancings, change of ownership transactions, recapitalizations, strategic acquisitions, mezzanine, growth capital, business expansion, lower middle market investments, debt investments, subordinated and second lien loans, senior secured and unitranche debt, preferred equity, warrants, subordinated debt, senior subordinated notes, junior secured loans, and unitranche loans. It does not invest in turnarounds or distressed situations. The fund prefers to invest in aerospace and defense, business services, consumer products and services including retail, food, and beverage, healthcare products and services, industrial products and services, information technology services, niche manufacturing, transportation and logistics, and value-added distribution sectors. It seeks to invest in companies based in United States. The fund typically invests between $5 million and $15 million per transaction in companies with annual revenues between $10 million and $150 million and an annual EBITDA between $3 million and $20 million, but it can occasionally invest in larger or smaller companies. It seeks to acquire minority equity stakes and board observation rights in conjunction with its investments.