Liberty All-Star Equity Fund (NYSE: USA) and THL Credit (NASDAQ:TCRD) are both small-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, risk, institutional ownership, dividends, earnings, analyst recommendations and profitabiliy.

Valuation and Earnings

This table compares Liberty All-Star Equity Fund and THL Credit’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Liberty All-Star Equity Fund N/A N/A N/A N/A N/A
THL Credit N/A N/A N/A $0.68 14.90

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Liberty All-Star Equity Fund and THL Credit, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Liberty All-Star Equity Fund 0 2 2 0 2.50
THL Credit 0 5 3 0 2.38

Liberty All-Star Equity Fund presently has a consensus price target of $44.50, suggesting a potential upside of 664.60%. THL Credit has a consensus price target of $10.92, suggesting a potential upside of 7.77%. Given Liberty All-Star Equity Fund’s stronger consensus rating and higher probable upside, equities research analysts plainly believe Liberty All-Star Equity Fund is more favorable than THL Credit.

Dividends

Liberty All-Star Equity Fund pays an annual dividend of $0.13 per share and has a dividend yield of 2.2%. THL Credit pays an annual dividend of $1.08 per share and has a dividend yield of 10.7%. THL Credit pays out 158.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Profitability

This table compares Liberty All-Star Equity Fund and THL Credit’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Liberty All-Star Equity Fund N/A N/A N/A
THL Credit 27.37% 10.49% 5.85%

Volatility & Risk

Liberty All-Star Equity Fund has a beta of 1.22, indicating that its share price is 22% more volatile than the S&P 500. Comparatively, THL Credit has a beta of 1.06, indicating that its share price is 6% more volatile than the S&P 500.

Insider & Institutional Ownership

31.1% of Liberty All-Star Equity Fund shares are held by institutional investors. Comparatively, 48.9% of THL Credit shares are held by institutional investors. 0.1% of Liberty All-Star Equity Fund shares are held by company insiders. Comparatively, 0.8% of THL Credit shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Summary

THL Credit beats Liberty All-Star Equity Fund on 7 of the 11 factors compared between the two stocks.

Liberty All-Star Equity Fund Company Profile

Liberty All-Star Equity Fund is a diversified, closed-end management investment fund. The Fund seeks total investment return comprising long-term capital appreciation and current income through investing primarily in a diversified portfolio of equity securities. It allocates its portfolio assets on an approximately equal basis among several independent investment management organizations having various investment styles recommended and monitored by its investment advisor. It invests at least 80% of its net assets in a diversified portfolio of equity securities. The Fund invests in various sectors, including financials, information technology, healthcare, consumer discretionary, consumer staples, industrials, energy, materials, real estate, utilities and telecommunication services. Its investment managers invest primarily for pension funds, endowments, foundations and other institutions. The Fund’s investment advisor is ALPS Advisors, Inc.

THL Credit Company Profile

THL Credit, Inc. is an externally managed, non-diversified closed-end management investment company. The Company’s investment objective is to generate both current income and capital appreciation, primarily through investments in privately negotiated debt and equity securities of lower middle market companies. The Company is a direct lender to lower middle-market companies and invests primarily in directly originated first lien senior secured loans, including unitranche investments. In certain instances, it also makes second lien secured loans and subordinated, or mezzanine, debt investments, which may include an associated equity component, such as warrants, preferred stock or similar securities, and direct equity investments. Its first lien senior secured loans may be structured as traditional first lien senior secured loans or as unitranche loans. The Company’s investment activities are managed by THL Credit Advisors LLC.

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