Contrasting WhiteHorse Finance (NASDAQ:WHF) & Sixth Street Specialty Lending (NYSE:TSLX)

WhiteHorse Finance (NASDAQ:WHF) and Sixth Street Specialty Lending (NYSE:TSLX) are both finance companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, valuation, institutional ownership, earnings, analyst recommendations, risk and profitability.

Profitability

This table compares WhiteHorse Finance and Sixth Street Specialty Lending’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
WhiteHorse Finance	4.36%	10.72%	4.51%
Sixth Street Specialty Lending	39.56%	13.47%	6.17%

Institutional & Insider Ownership

13.2% of WhiteHorse Finance shares are held by institutional investors. Comparatively, 70.3% of Sixth Street Specialty Lending shares are held by institutional investors. 2.5% of WhiteHorse Finance shares are held by company insiders. Comparatively, 3.2% of Sixth Street Specialty Lending shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Risk & Volatility

WhiteHorse Finance has a beta of 0.75, meaning that its stock price is 25% less volatile than the S&P 500. Comparatively, Sixth Street Specialty Lending has a beta of 0.85, meaning that its stock price is 15% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and target prices for WhiteHorse Finance and Sixth Street Specialty Lending, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
WhiteHorse Finance	2	5	0	0	1.71
Sixth Street Specialty Lending	0	2	7	1	2.90

WhiteHorse Finance presently has a consensus target price of $9.17, suggesting a potential upside of 31.70%. Sixth Street Specialty Lending has a consensus target price of $23.56, suggesting a potential upside of 9.46%. Given WhiteHorse Finance’s higher probable upside, research analysts plainly believe WhiteHorse Finance is more favorable than Sixth Street Specialty Lending.

Dividends

WhiteHorse Finance pays an annual dividend of $1.54 per share and has a dividend yield of 22.1%. Sixth Street Specialty Lending pays an annual dividend of $1.84 per share and has a dividend yield of 8.6%. WhiteHorse Finance pays out 1,026.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Sixth Street Specialty Lending pays out 91.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. WhiteHorse Finance has increased its dividend for 3 consecutive years. WhiteHorse Finance is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Valuation & Earnings

This table compares WhiteHorse Finance and Sixth Street Specialty Lending”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
WhiteHorse Finance	$92.82 million	1.74	$10.85 million	$0.15	46.40
Sixth Street Specialty Lending	$482.53 million	4.20	$220.02 million	$2.01	10.71

Sixth Street Specialty Lending has higher revenue and earnings than WhiteHorse Finance. Sixth Street Specialty Lending is trading at a lower price-to-earnings ratio than WhiteHorse Finance, indicating that it is currently the more affordable of the two stocks.

Summary

Sixth Street Specialty Lending beats WhiteHorse Finance on 14 of the 18 factors compared between the two stocks.

About WhiteHorse Finance

WhiteHorse Finance, Inc. is business development company, non-diversified, closed end management company specializing in originating senior secured loans, lower middle market, growth capital industries. It invests in broadline retail, office services and supplies, building products, health care services, health care supplies, research and consulting services, application software, home furnishings, specialized consumer services, data processing and outsourced services, leisure facilities, cable, and satellite. It prefers to invest in United States. It typically invests between $5 million to $25 million in companies having enterprise value of between $50 million and $350 million.

About Sixth Street Specialty Lending

Sixth Street Specialty Lending, Inc. (NYSE: TSLX) is a business development company. The fund provides senior secured loans (first-lien, second-lien, and unitranche), unsecured loans, mezzanine debt, and investments in corporate bonds and equity securities and structured products, non-control structured equity, and common equity with a focus on co-investments for organic growth, acquisitions, market or product expansion, restructuring initiatives, recapitalizations, and refinancing. The fund invests in business services, software & technology, healthcare, energy, consumer & retail, manufacturing, industrials, royalty related businesses, education, and specialty finance. It seeks to finance and lending to middle market companies principally located in the United States. The fund invests in companies with enterprise value between $50 million and $1 billion or more and EBITDA between $10 million and $250 million. The transaction size is between $15 million and $350 million. The fund invests across the spectrum of the capital structure and can arrange syndicated transactions of up to $500 million and hold sizeable positions within its credits.