Head-To-Head Analysis: Artisan Partners Asset Management (NYSE:APAM) versus Prospect Capital (NASDAQ:PSEC)

Prospect Capital (NASDAQ:PSEC) and Artisan Partners Asset Management (NYSE:APAM) are both finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their earnings, risk, valuation, profitability, dividends, analyst recommendations and institutional ownership.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Prospect Capital and Artisan Partners Asset Management, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Prospect Capital	2	0	0	0	1.00
Artisan Partners Asset Management	0	4	2	0	2.33

Prospect Capital presently has a consensus price target of $2.50, suggesting a potential downside of 8.42%. Artisan Partners Asset Management has a consensus price target of $44.00, suggesting a potential upside of 17.93%. Given Artisan Partners Asset Management’s stronger consensus rating and higher probable upside, analysts clearly believe Artisan Partners Asset Management is more favorable than Prospect Capital.

Dividends

Prospect Capital pays an annual dividend of $0.54 per share and has a dividend yield of 19.8%. Artisan Partners Asset Management pays an annual dividend of $4.04 per share and has a dividend yield of 10.8%. Prospect Capital pays out -66.7% of its earnings in the form of a dividend. Artisan Partners Asset Management pays out 100.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Prospect Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk and Volatility

Prospect Capital has a beta of 0.87, indicating that its share price is 13% less volatile than the S&P 500. Comparatively, Artisan Partners Asset Management has a beta of 1.77, indicating that its share price is 77% more volatile than the S&P 500.

Profitability

This table compares Prospect Capital and Artisan Partners Asset Management’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Prospect Capital	-39.56%	11.91%	5.39%
Artisan Partners Asset Management	24.26%	73.73%	21.39%

Institutional and Insider Ownership

9.1% of Prospect Capital shares are owned by institutional investors. Comparatively, 86.5% of Artisan Partners Asset Management shares are owned by institutional investors. 28.0% of Prospect Capital shares are owned by insiders. Comparatively, 12.5% of Artisan Partners Asset Management 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 & Earnings

This table compares Prospect Capital and Artisan Partners Asset Management”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Prospect Capital	$719.44 million	1.84	-$469.92 million	($0.81)	-3.37
Artisan Partners Asset Management	$1.20 billion	2.51	$290.32 million	$4.01	9.30

Artisan Partners Asset Management has higher revenue and earnings than Prospect Capital. Prospect Capital is trading at a lower price-to-earnings ratio than Artisan Partners Asset Management, indicating that it is currently the more affordable of the two stocks.

Summary

Artisan Partners Asset Management beats Prospect Capital on 13 of the 16 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 Artisan Partners Asset Management

Artisan Partners Asset Management Inc. is publicly owned investment manager. It provides its services to pension and profit sharing plans, trusts, endowments, foundations, charitable organizations, government entities, private funds and non-U.S. funds, as well as mutual funds, non-U.S. funds and collective trusts. It manages separate client-focused equity and fixed income portfolios. The firm invests in the public equity and fixed income markets across the globe. It invests in growth and value stocks of companies across all market capitalization. For fixed income component of its portfolio the firm invests in non-investment grade corporate bonds and secured and unsecured loans. It employs fundamental analysis to create its portfolios. Artisan Partners Asset Management Inc. was founded in 1994 and is based in Milwaukee, Wisconsin with additional offices in Atlanta, Georgia; New York City; San Francisco, California; Leawood, Kansas; and London, United Kingdom.