Monroe Capital (NASDAQ:MRCC) & Portman Ridge Finance (NASDAQ:PTMN) Financial Review

Monroe Capital (NASDAQ:MRCC) and Portman Ridge Finance (NASDAQ:PTMN) are both small-cap finance companies, but which is the better business? We will contrast the two businesses based on the strength of their institutional ownership, profitability, earnings, analyst recommendations, valuation, risk and dividends.

Insider & Institutional Ownership

30.1% of Portman Ridge Finance shares are owned by institutional investors. 3.8% of Monroe Capital shares are owned by insiders. Comparatively, 2.1% of Portman Ridge Finance shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Profitability

This table compares Monroe Capital and Portman Ridge Finance’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Monroe Capital	3.74%	10.70%	4.38%
Portman Ridge Finance	-15.92%	11.49%	4.54%

Dividends

Monroe Capital pays an annual dividend of $1.00 per share and has a dividend yield of 14.5%. Portman Ridge Finance pays an annual dividend of $1.88 per share and has a dividend yield of 15.4%. Monroe Capital pays out 1,111.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Portman Ridge Finance pays out -202.2% of its earnings in the form of a dividend. Portman Ridge Finance is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings and Valuation

This table compares Monroe Capital and Portman Ridge Finance”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Monroe Capital	$60.53 million	2.48	$9.70 million	$0.09	76.89
Portman Ridge Finance	$62.43 million	2.58	-$5.93 million	($0.93)	-13.12

Monroe Capital has higher earnings, but lower revenue than Portman Ridge Finance. Portman Ridge Finance is trading at a lower price-to-earnings ratio than Monroe Capital, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Monroe Capital has a beta of 0.92, suggesting that its stock price is 8% less volatile than the S&P 500. Comparatively, Portman Ridge Finance has a beta of 0.6, suggesting that its stock price is 40% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings and target prices for Monroe Capital and Portman Ridge Finance, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Monroe Capital	1	1	0	0	1.50
Portman Ridge Finance	0	1	0	0	2.00

Monroe Capital presently has a consensus price target of $7.6250, suggesting a potential upside of 10.19%. Portman Ridge Finance has a consensus price target of $14.00, suggesting a potential upside of 14.75%. Given Portman Ridge Finance’s stronger consensus rating and higher probable upside, analysts clearly believe Portman Ridge Finance is more favorable than Monroe Capital.

Summary

Portman Ridge Finance beats Monroe Capital on 9 of the 15 factors compared between the two stocks.

About Monroe Capital

Monroe Capital Corporation is a business development company specializing in customized financing solutions in senior, unitranche and junior secured debt, subordinated debt financing and to a lesser extent, unsecured debt and equity, including equity co-investments in preferred and common stock and warrants. It also provides financing primarily to leveraged buyouts in lower middle-market companies. It focuses to invest in the United States and Canada. The fund prefers to invest in companies with EBITDA between $3 and $35 million. Its makes minority equity investments.

About Portman Ridge Finance

Portman Ridge Finance Corporation is a business development company specializing in investments in unitranche loans (including last out), first lien loans, second lien loans, subordinated debt, equity co-investment, mezzanine, buyout in middle market companies. It also makes acquisitions in businesses complementary to the firm's business. It primarily invests in healthcare, cargo transport, manufacturing, industrial & environmental services, logistics & distribution, media & telecommunications, real estate, education, automotive, agriculture, aerospace/defense, packaging, electronics, finance, non-durable consumer, consumer products, business services, utilities, insurance, and food and beverage sectors. The fund typically invests $1 million to $20 million in its portfolio companies. It provides senior secured term loans from $2 million to $20 million maturing in five to seven years; second lien term loans from $5 million to $15 million maturing in six to eight years; senior unsecured loans $5 million to $23 million maturing in six to eight years; mezzanine loans from $5 million to $15 million maturing in seven to ten years; and equity investments from $1 to $5 million. The fund targets the companies with EBITDA between $5 million and $25 million. While investing in debt securities, it invests in those middle market firms with EBITDA between $10 million and $50 million and/or total debt between $25 million and $150 million. It invests in minority, and majority or control equity positions alongside its private equity sponsor partners.