Analyzing Hercules Capital (NYSE:HTGC) and Amalgamated Financial (NASDAQ:AMAL)

Hercules Capital (NYSE:HTGC) and Amalgamated Financial (NASDAQ:AMAL) are both finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their analyst recommendations, institutional ownership, valuation, earnings, risk, profitability and dividends.

Dividends

Hercules Capital pays an annual dividend of $1.60 per share and has a dividend yield of 8.4%. Amalgamated Financial pays an annual dividend of $0.56 per share and has a dividend yield of 1.9%. Hercules Capital pays out 106.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Amalgamated Financial pays out 16.8% of its earnings in the form of a dividend. Hercules Capital has increased its dividend for 1 consecutive years and Amalgamated Financial has increased its dividend for 4 consecutive years.

Risk and Volatility

Hercules Capital has a beta of 0.94, suggesting that its stock price is 6% less volatile than the S&P 500. Comparatively, Amalgamated Financial has a beta of 0.89, suggesting that its stock price is 11% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current recommendations for Hercules Capital and Amalgamated Financial, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Hercules Capital	0	2	5	0	2.71
Amalgamated Financial	1	0	1	0	2.00

Hercules Capital currently has a consensus price target of $20.5833, indicating a potential upside of 7.77%. Amalgamated Financial has a consensus price target of $33.00, indicating a potential upside of 14.27%. Given Amalgamated Financial’s higher possible upside, analysts plainly believe Amalgamated Financial is more favorable than Hercules Capital.

Earnings and Valuation

This table compares Hercules Capital and Amalgamated Financial”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Hercules Capital	$493.59 million	7.03	$262.97 million	$1.51	12.65
Amalgamated Financial	$434.51 million	2.00	$106.43 million	$3.34	8.65

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

Institutional and Insider Ownership

19.7% of Hercules Capital shares are held by institutional investors. Comparatively, 75.9% of Amalgamated Financial shares are held by institutional investors. 1.8% of Hercules Capital shares are held by company insiders. Comparatively, 1.3% of Amalgamated Financial shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Hercules Capital and Amalgamated Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Hercules Capital	51.46%	16.54%	8.37%
Amalgamated Financial	23.60%	15.21%	1.31%

Summary

Hercules Capital beats Amalgamated Financial on 12 of the 17 factors compared between the two stocks.

About Hercules Capital

Hercules Capital, Inc. is a business development company. The firm specializing in providing venture debt, debt, senior secured loans, and growth capital to privately held venture capital-backed companies at all stages of development from startups to expansion stage including select publicly listed companies and select special opportunity lower middle market companies that require additional capital to fund acquisitions, recapitalizations and refinancing and established-stage companies. The firm provides growth capital financing solutions for capital extension; management buy-out and corporate spin-out financing solutions; company, asset specific, or intellectual property acquisition financing; convertible, subordinated and/or mezzanine loans; domestic and international corporate expansion; vendor financing; revenue acceleration by sales and marketing development, and manufacturing expansion. It provides asset-based financing with a focus on cash flow; accounts receivable facilities; equipment loans or leases; equipment acquisition; facilities build-out and/or expansion; working capital revolving lines of credit; inventory. The firm also provides bridge financing to IPO or mergers and acquisitions or technology acquisition; dividend recapitalizations and other sources of investor liquidity; cash flow financing to protect against share price volatility; competitor acquisition; pre-IPO financing for extra cash on the balance sheet; public company financing to continue asset growth and production capacity; short-term bridge financing; and strategic and intellectual property acquisition financings. It also focuses on customized financing solutions, emerging growth, mid venture, and late venture financing. The firm invests primarily in structured debt with warrants and, to a lesser extent, in senior debt and equity investments. The firm generally seeks to invest in companies that have been operating for at least six to 12 months prior to the date of their investment. It prefers to invest in technology, SaaS Finance, energy technology, sustainable and renewable technology, and life sciences. Within technology the firm focuses on advanced specialty materials and chemicals; communication and networking, consumer and business products; consumer products and services, digital media and consumer internet; electronics and computer hardware; enterprise software and services; gaming; healthcare services; information services; business services; media, content and information; mobile; resource management; security software; semiconductors; semiconductors and hardware; and software sector. Within energy technology, it invests in agriculture; clean technology; energy and renewable technology, fuels, and power technology; geothermal; smart grid and energy efficiency and monitoring technologies; solar; and wind. Within life sciences, the firm invests in biopharmaceuticals; biotechnology tools; diagnostics; drug discovery, drug platform, development, and delivery; medical devices and equipment; surgical devices; therapeutics; pharma services; and specialty pharmaceuticals. Within sustainable and renewables, it invests in Vehicle Technology, Energy Generation and Storage, Ag Technology, Advanced Materials, and Industry 4.0. It also invests in educational services. The firm invests primarily in United States based companies and considers investment in the West Coast, Mid-Atlantic regions, Southeast and Midwest, particularly in the areas of software, biotech, and information services. The firm prefers to invest between $5 million and $200 million in equity per transactions. It invests generally between $1 million and $40 million in companies focused primarily on business services, communications, electronics, hardware, and healthcare services. The firm invests primarily in private companies but also have investments in public companies. For equity investments, the firm seeks to represent a controlling interest in its portfolio companies which may exceed 25% of the voting securities of such companies. The firm seeks to invest a limited portion of its assets in equipment-based loans to early-stage prospective portfolio companies. These loans are generally for amounts up to $3 million but may be up to $15 million for certain energy technology venture investments. The firm allows certain debt investments have the right to convert a portion of the debt investment into equity. It also co-invests with other private equity firms. The firm seeks to exit its investments through initial public offering, a private sale of equity interest to a third party, a merger or an acquisition of the company or a purchase of the equity position by the company or one of its stockholders. The firm has structured debt with warrants which typically have maturities of between two and seven years with an average of three years; senior debt with an investment horizon of less than three years; equipment loans with an investment horizon ranging from three to four years; and equity related securities with an investment horizon ranging from three to seven years. The firm prefers to invest through its balance sheet capital. The firm formerly known as Hercules Technology Growth Capital, Inc. Hercules Capital, Inc. was founded in December 2003 and is based in San Mateo, California with additional offices in North America and Europe.

About Amalgamated Financial

Amalgamated Financial Corp. operates as the bank holding company for Amalgamated Bank that provides commercial and retail banking, investment management, and trust and custody services for commercial and retail customers in the United States. The company accepts various deposit products, including non-interest bearing accounts, interest-bearing demand products, savings accounts, money market accounts, NOW accounts, and certificates of deposit. It also provides various commercial loans comprising commercial and industrial, multifamily mortgage, and commercial real estate loans; residential mortgage loans; and retail loans, such as residential real estate, consumer solar, and consumer and other loans. In addition, the company offers online banking, bill payment, online cash management, and safe deposit box rental services; debit and ATM cards; and trust, custody, and investment management services comprising asset safekeeping, corporate actions, income collections, proxy, account transition, asset transfers, and conversion management services. Further, it provides investment products, such as funds spanning equity, fixed-income, real estate, and alternative investment products; and brokerage, asset management, and insurance products. Amalgamated Financial Corp. was founded in 1923 and is headquartered in New York, New York.