Contrasting Bain Capital Specialty Finance (NYSE:BCSF) and WhiteHorse Finance (NASDAQ:WHF)

WhiteHorse Finance (NASDAQ:WHF) and Bain Capital Specialty Finance (NYSE:BCSF) are both small-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, institutional ownership, risk, dividends, analyst recommendations, earnings and valuation.

Earnings & Valuation

This table compares WhiteHorse Finance and Bain Capital Specialty Finance”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
WhiteHorse Finance	$92.82 million	1.71	$10.85 million	$0.43	15.91
Bain Capital Specialty Finance	$292.65 million	2.97	$119.42 million	$1.44	9.32

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

Volatility and Risk

WhiteHorse Finance has a beta of 0.56, indicating that its share price is 44% less volatile than the S&P 500. Comparatively, Bain Capital Specialty Finance has a beta of 0.6, indicating that its share price is 40% less volatile than the S&P 500.

Analyst Recommendations

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

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
WhiteHorse Finance	2	3	0	0	1.60
Bain Capital Specialty Finance	0	2	1	0	2.33

WhiteHorse Finance currently has a consensus target price of $7.75, indicating a potential upside of 13.30%. Bain Capital Specialty Finance has a consensus target price of $15.00, indicating a potential upside of 11.77%. Given WhiteHorse Finance’s higher possible upside, equities analysts plainly believe WhiteHorse Finance is more favorable than Bain Capital Specialty Finance.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
WhiteHorse Finance	12.91%	9.93%	4.14%
Bain Capital Specialty Finance	33.45%	11.03%	4.66%

Insider & Institutional Ownership

13.2% of WhiteHorse Finance shares are owned by institutional investors. 2.5% of WhiteHorse Finance shares are owned by insiders. Comparatively, 0.6% of Bain Capital Specialty Finance shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Dividends

WhiteHorse Finance pays an annual dividend of $1.00 per share and has a dividend yield of 14.6%. Bain Capital Specialty Finance pays an annual dividend of $1.68 per share and has a dividend yield of 12.5%. 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. Bain Capital Specialty Finance pays out 116.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. WhiteHorse Finance has raised its dividend for 3 consecutive years and Bain Capital Specialty Finance has raised its dividend for 4 consecutive years.

Summary

Bain Capital Specialty Finance beats WhiteHorse Finance on 12 of the 17 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 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.