Head-To-Head Review: Carlyle Secured Lending (NASDAQ:CGBD) & Saratoga Investment (NYSE:SAR)

Carlyle Secured Lending (NASDAQ:CGBD) and Saratoga Investment (NYSE:SAR) are both small-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their institutional ownership, earnings, risk, dividends, valuation, analyst recommendations and profitability.

Risk and Volatility

Carlyle Secured Lending has a beta of 0.88, suggesting that its stock price is 12% less volatile than the S&P 500. Comparatively, Saratoga Investment has a beta of 0.64, suggesting that its stock price is 36% less volatile than the S&P 500.

Valuation & Earnings

This table compares Carlyle Secured Lending and Saratoga Investment”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Carlyle Secured Lending	$232.59 million	2.96	$88.98 million	$1.20	11.28
Saratoga Investment	$148.85 million	2.73	$28.09 million	$2.47	10.33

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

Analyst Ratings

This is a breakdown of recent recommendations for Carlyle Secured Lending and Saratoga Investment, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Carlyle Secured Lending	2	3	1	0	1.83
Saratoga Investment	0	4	0	0	2.00

Carlyle Secured Lending currently has a consensus price target of $15.10, suggesting a potential upside of 11.60%. Saratoga Investment has a consensus price target of $24.25, suggesting a potential downside of 4.96%. Given Carlyle Secured Lending’s higher possible upside, equities analysts clearly believe Carlyle Secured Lending is more favorable than Saratoga Investment.

Dividends

Carlyle Secured Lending pays an annual dividend of $1.60 per share and has a dividend yield of 11.8%. Saratoga Investment pays an annual dividend of $3.00 per share and has a dividend yield of 11.8%. Carlyle Secured Lending pays out 133.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Saratoga Investment pays out 121.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Institutional & Insider Ownership

24.5% of Carlyle Secured Lending shares are held by institutional investors. Comparatively, 19.1% of Saratoga Investment shares are held by institutional investors. 0.6% of Carlyle Secured Lending shares are held by insiders. Comparatively, 10.0% of Saratoga Investment shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares Carlyle Secured Lending and Saratoga Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Carlyle Secured Lending	29.71%	9.85%	4.59%
Saratoga Investment	24.85%	12.71%	4.04%

Summary

Carlyle Secured Lending beats Saratoga Investment on 11 of the 16 factors compared between the two stocks.

About Carlyle Secured Lending

Carlyle Secured Lending, Inc. is business development company specializing in first lien debt, senior secured loans, second lien senior secured loan unsecured debt, mezzanine debt and investments in equities. It specializes in directly investing. It specializes in middle market. It targets healthcare and pharmaceutical, aerospace and defense, high tech industries, business services, software, beverage food and tobacco, hotel gamming and leisure, banking finance insurance and in real estate sector. The fund seeks to invest across United States of America, Luxembourg, Cayman Islands, Cyprus, and United Kingdom. It invests in companies with EBITDA between $25 million and $100 million.

About Saratoga Investment

Saratoga Investment Corp. is a business development company specializing in leveraged and management buyouts, acquisition financings, growth financings, recapitalization, debt refinancing, and transitional financing transactions at the lower end of middle market companies. It structures its investments as debt and equity by investing through first and second lien loans, mezzanine debt, co-investments, select high yield bonds, senior secured bonds, unsecured bonds, and preferred and common equity. The firm prefers to invest in aerospace, automotive aftermarket and services, business products and services, consumer products and services, education, environmental services, industrial services, financial services, food and beverage, healthcare products and services, logistics, distribution, manufacturing, restaurants services, food services, software services, technology services, specialty chemical, media and telecommunications. It seeks to invest in the United States. The firm primarily invests $5 million to $50 million in companies having EBITDA of $2 million or greater and revenues of $8 million to $250 million. The firm prefer to take a majority stake. It invests through direct lending as well as participation in loan syndicates. The firm was formerly known as GSC Investment Corp. Saratoga Investment Corp. was formed on 2007 and is based in New York, New York with an additional office in Florham Park, New Jersey.