Solar Senior Capital (SUNS) versus KCAP Financial (KCAP) Head-To-Head Comparison

KCAP Financial (NASDAQ: KCAP) and Solar Senior Capital (NASDAQ:SUNS) are both finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their earnings, valuation, profitability, institutional ownership, analyst recommendations, risk and dividends.

Profitability

This table compares KCAP Financial and Solar Senior Capital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
KCAP Financial 17.53% 7.44% 3.84%
Solar Senior Capital 76.07% 7.98% 4.22%

Dividends

KCAP Financial pays an annual dividend of $0.48 per share and has a dividend yield of 14.2%. Solar Senior Capital pays an annual dividend of $1.41 per share and has a dividend yield of 8.5%. KCAP Financial pays out 320.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Solar Senior Capital pays out 94.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Insider and Institutional Ownership

19.7% of KCAP Financial shares are owned by institutional investors. Comparatively, 32.5% of Solar Senior Capital shares are owned by institutional investors. 8.0% of KCAP Financial shares are owned by company insiders. Comparatively, 5.6% of Solar Senior Capital shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Analyst Ratings

This is a breakdown of recent recommendations and price targets for KCAP Financial and Solar Senior Capital, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
KCAP Financial 0 1 1 0 2.50
Solar Senior Capital 0 1 2 0 2.67

KCAP Financial presently has a consensus target price of $9.75, indicating a potential upside of 188.46%. Solar Senior Capital has a consensus target price of $17.17, indicating a potential upside of 3.91%. Given KCAP Financial’s higher probable upside, equities research analysts plainly believe KCAP Financial is more favorable than Solar Senior Capital.

Valuation & Earnings

This table compares KCAP Financial and Solar Senior Capital’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
KCAP Financial $32.54 million 3.86 $5.58 million $0.15 22.53
Solar Senior Capital N/A N/A N/A $1.49 11.09

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

Volatility and Risk

KCAP Financial has a beta of 1.71, indicating that its stock price is 71% more volatile than the S&P 500. Comparatively, Solar Senior Capital has a beta of 0.61, indicating that its stock price is 39% less volatile than the S&P 500.

Summary

Solar Senior Capital beats KCAP Financial on 8 of the 13 factors compared between the two stocks.

KCAP Financial Company Profile

KCAP Financial, Inc. is an internally managed, non-diversified closed-end investment company. The Company has approximately three principal areas of investments. First, the Company originates, structures and invests in senior secured term loans and mezzanine debt primarily in privately-held middle market companies (the debt securities portfolio). In addition, the Company may invest in the equity securities of privately held middle market companies. Second, the Company invests in asset management companies (the Asset Manager Affiliates) that manage collateralized loan obligation funds (CLO Funds). Third, the Company invests in debt and subordinated securities issued by CLOs (CLO fund securities). These CLO fund securities are primarily managed by its Asset Manager Affiliates, but from time-to-time the Company makes investments in CLO Fund Securities managed by other asset managers. The CLO funds typically invest in syndicated loans, high-yield bonds and other credit instruments.

Solar Senior Capital Company Profile

Solar Senior Capital Ltd. is a closed-end, externally managed, non-diversified management investment company. The Company’s investment objective is to seek to maximize current income consistent with the preservation of capital. The Company seeks to achieve its investment objective by directly and indirectly investing in senior loans, including first lien, unitranche, and second lien debt instruments, made to private middle-market companies whose debt is rated below investment grade, which it refers to collectively as senior loans. It may also invest in debt of public companies that are thinly traded or in equity securities. Under normal market conditions, at least 80% of the value of its net assets (including the amount of any borrowings for investment purposes) will be invested in senior loans. It invests in privately held the United States middle-market companies. Its investment activities are managed by Solar Capital Partners, LLC (Solar Capital Partners or the Investment Advisor).

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