Bain Capital Specialty Finance (NYSE:BCSF) & Fidus Investment (NASDAQ:FDUS) Financial Comparison

Fidus Investment (NASDAQ:FDUS) and Bain Capital Specialty Finance (NYSE:BCSF) are both small-cap finance companies, but which is the better stock? We will compare the two businesses based on the strength of their dividends, analyst recommendations, earnings, profitability, valuation, institutional ownership and risk.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Fidus Investment	51.88%	11.52%	6.41%
Bain Capital Specialty Finance	37.90%	11.41%	4.92%

Volatility and Risk

Fidus Investment has a beta of 0.95, meaning that its share price is 5% less volatile than the S&P 500. Comparatively, Bain Capital Specialty Finance has a beta of 0.83, meaning that its share price is 17% less volatile than the S&P 500.

Insider & Institutional Ownership

28.1% of Fidus Investment shares are owned by institutional investors. 0.9% of Fidus Investment shares are owned by company insiders. Comparatively, 0.6% of Bain Capital Specialty Finance shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Earnings and Valuation

This table compares Fidus Investment and Bain Capital Specialty Finance”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Fidus Investment	$146.15 million	5.16	$78.29 million	$2.31	9.23
Bain Capital Specialty Finance	$292.65 million	3.42	$119.42 million	$1.66	9.30

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

Analyst Recommendations

This is a breakdown of current ratings and target prices for Fidus Investment and Bain Capital Specialty Finance, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Fidus Investment	0	2	0	1	2.67
Bain Capital Specialty Finance	0	1	1	1	3.00

Fidus Investment presently has a consensus target price of $22.00, indicating a potential upside of 3.14%. Bain Capital Specialty Finance has a consensus target price of $16.50, indicating a potential upside of 6.83%. Given Bain Capital Specialty Finance’s stronger consensus rating and higher possible upside, analysts plainly believe Bain Capital Specialty Finance is more favorable than Fidus Investment.

Dividends

Fidus Investment pays an annual dividend of $1.72 per share and has a dividend yield of 8.1%. Bain Capital Specialty Finance pays an annual dividend of $1.68 per share and has a dividend yield of 10.9%. Fidus Investment pays out 74.5% of its earnings in the form of a dividend. Bain Capital Specialty Finance pays out 101.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Bain Capital Specialty Finance has increased its dividend for 4 consecutive years. Bain Capital Specialty Finance is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Fidus Investment beats Bain Capital Specialty Finance on 9 of the 17 factors compared between the two stocks.

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.

About Bain Capital Specialty Finance

Bain Capital Specialty Finance, Inc. is business development company specializing in direct loans to middle-market companies. The fund seeks to invest in senior investments with a first or second lien on collateral, senior first lien, stretch senior, senior second lien, unitranche, mezzanine debt, junior securities, other junior investments, and secondary purchases of assets or portfolios that primarily consist of middle-market corporate debt. It typically invests in companies with EBITDA between $10 million and $150 million.