Critical Survey: Saratoga Investment (NYSE:SAR) & Trinity Capital (NASDAQ:TRIN)

Trinity Capital (NASDAQ:TRIN) and Saratoga Investment (NYSE:SAR) are both small-cap finance companies, but which is the superior business? We will compare the two businesses based on the strength of their profitability, institutional ownership, earnings, analyst recommendations, risk, dividends and valuation.

Institutional & Insider Ownership

24.6% of Trinity Capital shares are owned by institutional investors. Comparatively, 19.1% of Saratoga Investment shares are owned by institutional investors. 5.3% of Trinity Capital shares are owned by company insiders. Comparatively, 10.0% of Saratoga Investment shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Dividends

Trinity Capital pays an annual dividend of $2.04 per share and has a dividend yield of 13.6%. Saratoga Investment pays an annual dividend of $3.00 per share and has a dividend yield of 13.6%. Trinity Capital pays out 104.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Saratoga Investment pays out 123.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Trinity Capital has raised its dividend for 1 consecutive years.

Profitability

This table compares Trinity Capital and Saratoga Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Trinity Capital	46.18%	14.97%	6.68%
Saratoga Investment	30.61%	9.19%	3.09%

Earnings and Valuation

This table compares Trinity Capital and Saratoga Investment”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Trinity Capital	$204.61 million	6.09	$135.60 million	$1.96	7.64
Saratoga Investment	$52.11 million	6.85	$28.09 million	$2.44	9.02

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

Analyst Ratings

This is a summary of current ratings and target prices for Trinity Capital and Saratoga Investment, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Trinity Capital	1	1	5	1	2.75
Saratoga Investment	0	6	0	0	2.00

Trinity Capital presently has a consensus target price of $16.29, suggesting a potential upside of 8.72%. Saratoga Investment has a consensus target price of $23.63, suggesting a potential upside of 7.39%. Given Trinity Capital’s stronger consensus rating and higher possible upside, equities research analysts plainly believe Trinity Capital is more favorable than Saratoga Investment.

Risk & Volatility

Trinity Capital has a beta of 0.55, meaning that its stock price is 45% less volatile than the S&P 500. Comparatively, Saratoga Investment has a beta of 0.54, meaning that its stock price is 46% less volatile than the S&P 500.

Summary

Trinity Capital beats Saratoga Investment on 13 of the 18 factors compared between the two stocks.

About Trinity Capital

Trinity Capital Inc. is a business development company. It is a venture capital firm specializing in venture debt to growth stage companies looking for loans and/or equipment financing. Trinity Capital Inc. was founded in 2019 is based in Phoenix, Arizona with additional offices in the United States.

About Saratoga Investment

Saratoga Investment Corp. is a business development company specializing in leveraged and management buyouts, acquisition financings, growth financings, recapitalization, debt refinancing, and transitional financing transactions at the lower end of middle market companies. It structures its investments as debt and equity by investing through first and second lien loans, mezzanine debt, co-investments, select high yield bonds, senior secured bonds, unsecured bonds, and preferred and common equity. The firm prefers to invest in aerospace, automotive aftermarket and services, business products and services, consumer products and services, education, environmental services, industrial services, financial services, food and beverage, healthcare products and services, logistics, distribution, manufacturing, restaurants services, food services, software services, technology services, specialty chemical, media and telecommunications. It seeks to invest in the United States. The firm primarily invests $5 million to $50 million in companies having EBITDA of $2 million or greater and revenues of $8 million to $250 million. The firm prefer to take a majority stake. It invests through direct lending as well as participation in loan syndicates. The firm was formerly known as GSC Investment Corp. Saratoga Investment Corp. was formed on 2007 and is based in New York, New York with an additional office in Florham Park, New Jersey.