Prospect Capital (NASDAQ:PSEC – Get Free Report) and KKR & Co. Inc. (NYSE:KKR – Get Free Report) are both finance companies, but which is the better investment? We will compare the two businesses based on the strength of their risk, valuation, institutional ownership, analyst recommendations, earnings, profitability and dividends.
Risk and Volatility
Prospect Capital has a beta of 0.85, indicating that its stock price is 15% less volatile than the S&P 500. Comparatively, KKR & Co. Inc. has a beta of 1.93, indicating that its stock price is 93% more volatile than the S&P 500.
Insider & Institutional Ownership
9.1% of Prospect Capital shares are held by institutional investors. Comparatively, 76.3% of KKR & Co. Inc. shares are held by institutional investors. 28.3% of Prospect Capital shares are held by insiders. Comparatively, 39.3% of KKR & Co. Inc. shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.
Analyst Recommendations
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Prospect Capital | 1 | 0 | 0 | 0 | 1.00 |
| KKR & Co. Inc. | 0 | 4 | 12 | 0 | 2.75 |
Prospect Capital currently has a consensus target price of $2.50, suggesting a potential downside of 13.49%. KKR & Co. Inc. has a consensus target price of $158.07, suggesting a potential upside of 17.44%. Given KKR & Co. Inc.’s stronger consensus rating and higher probable upside, analysts clearly believe KKR & Co. Inc. is more favorable than Prospect Capital.
Dividends
Prospect Capital pays an annual dividend of $0.54 per share and has a dividend yield of 18.7%. KKR & Co. Inc. pays an annual dividend of $0.74 per share and has a dividend yield of 0.5%. Prospect Capital pays out -40.3% of its earnings in the form of a dividend. KKR & Co. Inc. pays out 34.4% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. KKR & Co. Inc. has increased its dividend for 5 consecutive years. Prospect Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.
Earnings & Valuation
This table compares Prospect Capital and KKR & Co. Inc.”s top-line revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Prospect Capital | -$406.94 million | -3.28 | $262.83 million | ($1.34) | -2.16 |
| KKR & Co. Inc. | $21.88 billion | 5.48 | $3.08 billion | $2.15 | 62.60 |
KKR & Co. Inc. has higher revenue and earnings than Prospect Capital. Prospect Capital is trading at a lower price-to-earnings ratio than KKR & Co. Inc., indicating that it is currently the more affordable of the two stocks.
Profitability
This table compares Prospect Capital and KKR & Co. Inc.’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Prospect Capital | -69.68% | 12.14% | 5.59% |
| KKR & Co. Inc. | 12.95% | 6.30% | 1.08% |
Summary
KKR & Co. Inc. beats Prospect Capital on 13 of the 17 factors compared between the two stocks.
About Prospect Capital
Prospect Capital Corporation is a business development company. It specializes in middle market, mature, mezzanine finance, later stage, emerging growth, leveraged buyouts, refinancing, acquisitions, recapitalizations, turnaround, growth capital, development, capital expenditures and subordinated debt tranches of collateralized loan obligations, cash flow term loans, market place lending and bridge transactions. It also makes real estate investments particularly in multi-family residential real estate asset class. The fund makes secured debt, senior debt, senior and secured term loans, unitranche debt, first-lien and second lien, private debt, private equity, mezzanine debt, and equity investments in private and microcap public businesses. It focuses on both primary origination and secondary loans/portfolios and invests in situations like debt financings for private equity sponsors, acquisitions, dividend recapitalizations, growth financings, bridge loans, cash flow term loans, real estate financings/investments. It also focuses on investing in small-sized and medium-sized private companies rather than large public companies. The fund typically invests across all industry sectors, with a particular expertise in the energy and industrial sectors. It invests in aerospace and defense, chemicals, conglomerate services, consumer services, ecological, electronics, financial services, machinery, manufacturing, media, pharmaceuticals, retail, software, specialty minerals, textiles and leather, transportation, oil and gas production, coal production, materials, industrials, consumer discretionary, information technology, utilities, pipeline, storage, power generation and distribution, renewable and clean energy, oilfield services, healthcare, food and beverage, education, business services, and other select sectors. It prefers to invest in the United States and Canada. The fund seeks to invest between $10 million to $500 million per transaction in companies with EBITDA between $5 million and $150 million, sales value between $25 million and $500 million, and enterprise value between $5 million and $1000 million. It fund also co-invests for larger deals. The fund seeks control acquisitions by providing multiple levels of the capital structure. The fund focuses on sole, agented, club, or syndicated deals.
About KKR & Co. Inc.
KKR & Co., Inc. operates as an investment firm. It offers alternative asset management as well as capital markets and insurance solutions. The firm’s business segments include Asset Management and Insurance Business. The Asset Management segment engages in providing private equity, real assets, credit and liquid strategies, capital markets, and principal activities. The Insurance Business segment offers retirement, life insurance and reinsurance solutions to clients across individual and institutional markets. The company was founded by Henry Kravis, George R. Roberts, and Jerome Kholberg on May 1, 1976 and is headquartered in New York, NY.
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