Analyzing Rand Capital (NASDAQ:RAND) and Main Street Capital (NYSE:MAIN)

Main Street Capital (NYSE:MAIN) and Rand Capital (NASDAQ:RAND) are both finance companies, but which is the superior stock? We will compare the two companies based on the strength of their analyst recommendations, profitability, earnings, valuation, dividends, institutional ownership and risk.

Insider & Institutional Ownership

20.3% of Main Street Capital shares are held by institutional investors. 4.1% of Main Street Capital shares are held by company insiders. Comparatively, 68.2% of Rand Capital shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Profitability

This table compares Main Street Capital and Rand Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Main Street Capital	96.16%	12.70%	6.85%
Rand Capital	-90.42%	6.97%	6.47%

Volatility & Risk

Main Street Capital has a beta of 0.88, meaning that its stock price is 12% less volatile than the S&P 500. Comparatively, Rand Capital has a beta of 0.25, meaning that its stock price is 75% less volatile than the S&P 500.

Dividends

Main Street Capital pays an annual dividend of $3.06 per share and has a dividend yield of 4.7%. Rand Capital pays an annual dividend of $1.16 per share and has a dividend yield of 8.0%. Main Street Capital pays out 50.4% of its earnings in the form of a dividend. Rand Capital pays out -47.7% 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. Main Street Capital has increased its dividend for 4 consecutive years. Rand Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Main Street Capital and Rand Capital, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Main Street Capital	0	4	1	1	2.50
Rand Capital	0	0	0	0	0.00

Main Street Capital presently has a consensus price target of $61.20, suggesting a potential downside of 6.12%. Given Main Street Capital’s stronger consensus rating and higher possible upside, equities research analysts plainly believe Main Street Capital is more favorable than Rand Capital.

Earnings and Valuation

This table compares Main Street Capital and Rand Capital”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Main Street Capital	$541.03 million	10.78	$508.08 million	$6.07	10.74
Rand Capital	$8.56 million	5.05	$8.83 million	($2.43)	-5.99

Main Street Capital has higher revenue and earnings than Rand Capital. Rand Capital is trading at a lower price-to-earnings ratio than Main Street Capital, indicating that it is currently the more affordable of the two stocks.

Summary

Main Street Capital beats Rand Capital on 15 of the 18 factors compared between the two stocks.

About Main Street Capital

Main Street Capital Corporation is a business development company specializes in equity capital to lower middle market companies. The firm specializing in recapitalizations, management buyouts, refinancing, family estate planning, management buyouts, refinancing, industry consolidation, mature, later stage emerging growth. The firm also provides debt capital to middle market companies for acquisitions, management buyouts, growth financings, recapitalizations, and refinancing. The firm seeks to partner with entrepreneurs, business owners and management teams and generally provides “one stop” financing alternatives within its lower middle market portfolio. It prefers to invest in air freight and logistics, auto components, building products, chemicals, commercial services, computers, construction and engineering, consumer finance, consumer services, electronic equipment, energy equipment and services, financial services, health care equipment, health care providers, hotels, restaurants, and leisure, internet software and services, IT Services, machinery, oil, gas and consumable fuels, paper and forest products, professional and industrial services, road and rail, software, specialty retail, telecommunication, consumer discretionary, energy, materials, technology, and transportation. The firm typically invests in lower middle market companies generally with annual revenues between $10 million and $150 million. It prefers to invest in ranging between $5 million and $100 million in equity investment and enterprise value in ranging between $3 million and $20 million. The firm typically prefers to invest in the range of $5 million and $150 million per transaction in debt investment value and in the range of $3 million and $75 million in annual EBITDA in between $3 million and $25 million in lower middle market $5 million and $75 million in credit solution. The firm’s middle market debt investments are made in businesses that are generally larger in size than its lower middle market portfolio companies. It takes 5 percent minority and up to 50 percent majority equity investments. Main Street Capital Corporation was founded in 2007 and is based in Houston, Texas with an additional office in Chojnów, Poland.

About Rand Capital

Rand Capital Corporation is a business development company specializing in subordinated debt with warrants or preferred equity and venture capital investments. Within private equity, the firm specializing in capital growth and lower middle market investments. Within venture capital, it specializing in early to late-stage private businesses. It does not prefer to invest in real estate sector. It prefers to invest in software, professional services, manufacturing, consumer, healthcare, automotive and public d stocks. It prefers to invest in East or Midwest U.S. operations sectors. It typically invests between $0.75 million and $5 million with initial target size of $1.5 million. It seeks to invest in companies having more than $2 million in revenue or having excess of $1.5 million and up to $5 million in EBITDA. It prefers to be a minority stake and seeks to take a Board seat in its portfolio companies. It typically holds its investments for a period up to five years.