Contrasting WhiteHorse Finance (NASDAQ:WHF) and Rand Capital (NASDAQ:RAND)

WhiteHorse Finance (NASDAQ:WHF) and Rand Capital (NASDAQ:RAND) are both small-cap finance companies, but which is the better business? We will compare the two businesses based on the strength of their risk, analyst recommendations, dividends, institutional ownership, profitability, valuation and earnings.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for WhiteHorse Finance and Rand Capital, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
WhiteHorse Finance	3	2	0	0	1.40
Rand Capital	1	0	0	0	1.00

WhiteHorse Finance presently has a consensus price target of $7.75, suggesting a potential upside of 8.70%. Given WhiteHorse Finance’s stronger consensus rating and higher probable upside, analysts clearly believe WhiteHorse Finance is more favorable than Rand Capital.

Volatility & Risk

WhiteHorse Finance has a beta of 0.79, indicating that its share price is 21% less volatile than the S&P 500. Comparatively, Rand Capital has a beta of 0.25, indicating that its share price is 75% less volatile than the S&P 500.

Insider and Institutional Ownership

13.2% of WhiteHorse Finance shares are owned by institutional investors. 2.5% of WhiteHorse Finance shares are owned by insiders. Comparatively, 68.2% of Rand Capital shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Valuation and Earnings

This table compares WhiteHorse Finance and Rand Capital”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
WhiteHorse Finance	$15.86 million	10.45	$10.85 million	$0.43	16.58
Rand Capital	-$12.06 million	-3.36	$8.83 million	($4.20)	-3.24

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

Profitability

This table compares WhiteHorse Finance and Rand Capital’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%
Rand Capital	-90.42%	6.97%	6.47%

Dividends

WhiteHorse Finance pays an annual dividend of $1.00 per share and has a dividend yield of 14.0%. Rand Capital pays an annual dividend of $1.16 per share and has a dividend yield of 8.5%. WhiteHorse Finance pays out 232.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Rand Capital pays out -27.6% of its earnings in the form of a dividend. WhiteHorse Finance has raised 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.

Summary

WhiteHorse Finance beats Rand Capital on 13 of the 16 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 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.