Analyzing Palmer Square Capital BDC (NYSE:PSBD) and Horizon Technology Finance (NASDAQ:HRZN)

Palmer Square Capital BDC (NYSE:PSBD) and Horizon Technology Finance (NASDAQ:HRZN) 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, risk, analyst recommendations, profitability, dividends, valuation and earnings.

Risk and Volatility

Palmer Square Capital BDC has a beta of 0.82, meaning that its share price is 18% less volatile than the S&P 500. Comparatively, Horizon Technology Finance has a beta of 0.99, meaning that its share price is 1% less volatile than the S&P 500.

Valuation & Earnings

This table compares Palmer Square Capital BDC and Horizon Technology Finance”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Palmer Square Capital BDC	$143.51 million	3.16	$47.67 million	$0.56	25.23
Horizon Technology Finance	$99.92 million	2.97	-$5.63 million	($1.15)	-6.07

Palmer Square Capital BDC has higher revenue and earnings than Horizon Technology Finance. Horizon Technology Finance is trading at a lower price-to-earnings ratio than Palmer Square Capital BDC, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Palmer Square Capital BDC and Horizon Technology Finance’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Palmer Square Capital BDC	13.51%	10.91%	4.15%
Horizon Technology Finance	-48.76%	14.02%	5.68%

Dividends

Palmer Square Capital BDC pays an annual dividend of $1.44 per share and has a dividend yield of 10.2%. Horizon Technology Finance pays an annual dividend of $1.32 per share and has a dividend yield of 18.9%. Palmer Square Capital BDC pays out 257.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Horizon Technology Finance pays out -114.8% of its earnings in the form of a dividend. Horizon Technology Finance is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider and Institutional Ownership

6.5% of Palmer Square Capital BDC shares are owned by institutional investors. Comparatively, 4.9% of Horizon Technology Finance shares are owned by institutional investors. 1.0% of Palmer Square Capital BDC shares are owned by company insiders. Comparatively, 1.3% of Horizon Technology Finance shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of current recommendations for Palmer Square Capital BDC and Horizon Technology Finance, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Palmer Square Capital BDC	0	2	2	0	2.50
Horizon Technology Finance	2	2	1	0	1.80

Palmer Square Capital BDC presently has a consensus price target of $14.3750, indicating a potential upside of 1.76%. Horizon Technology Finance has a consensus price target of $7.30, indicating a potential upside of 4.58%. Given Horizon Technology Finance’s higher possible upside, analysts clearly believe Horizon Technology Finance is more favorable than Palmer Square Capital BDC.

Summary

Palmer Square Capital BDC beats Horizon Technology Finance on 9 of the 16 factors compared between the two stocks.

About Palmer Square Capital BDC

Palmer Square Capital BDC Inc. is an externally managed, non-diversified closed-end management investment company which primarily lends to and invests in corporate debt securities, including small to large private U.S. companies and has elected to be regulated as a business development company. Palmer Square Capital BDC Inc. is based in MISSION WOODS, Kan.

About Horizon Technology Finance

Horizon Technology Finance Corporation is a business development company specializing in lending and and investing in development-stage investments. It focuses on making secured debt and venture lending investments to venture capital backed companies in the technology, life science, healthcare information and services, cleantech and sustainability industries. It seeks to invest in companies in the United States.