FS Investment Corporation (FSIC) & Solar Capital (SLRC) Financial Review
FS Investment Corporation (NYSE: FSIC) and Solar Capital (NASDAQ:SLRC) are both finance companies, but which is the better stock? We will contrast the two companies based on the strength of their analyst recommendations, institutional ownership, valuation, profitabiliy, risk, earnings and dividends.
FS Investment Corporation pays an annual dividend of $0.89 per share and has a dividend yield of 9.8%. Solar Capital pays an annual dividend of $1.60 per share and has a dividend yield of 7.3%. FS Investment Corporation pays out 58.6% of its earnings in the form of a dividend. Solar Capital pays out 70.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. FS Investment Corporation is clearly the better dividend stock, given its higher yield and lower payout ratio.
Volatility & Risk
FS Investment Corporation has a beta of 0.94, indicating that its stock price is 6% less volatile than the S&P 500. Comparatively, Solar Capital has a beta of 0.55, indicating that its stock price is 45% less volatile than the S&P 500.
Valuation and Earnings
This table compares FS Investment Corporation and Solar Capital’s gross revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|FS Investment Corporation||N/A||N/A||N/A||$1.52||5.95|
FS Investment Corporation is trading at a lower price-to-earnings ratio than Solar Capital, indicating that it is currently the more affordable of the two stocks.
This is a breakdown of recent ratings and recommmendations for FS Investment Corporation and Solar Capital, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|FS Investment Corporation||0||6||1||0||2.14|
FS Investment Corporation currently has a consensus price target of $9.75, suggesting a potential upside of 7.73%. Solar Capital has a consensus price target of $22.40, suggesting a potential upside of 2.19%. Given FS Investment Corporation’s higher possible upside, analysts clearly believe FS Investment Corporation is more favorable than Solar Capital.
This table compares FS Investment Corporation and Solar Capital’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|FS Investment Corporation||86.84%||9.44%||5.21%|
Insider & Institutional Ownership
32.8% of FS Investment Corporation shares are held by institutional investors. Comparatively, 62.4% of Solar Capital shares are held by institutional investors. 1.0% of FS Investment Corporation shares are held by company insiders. Comparatively, 5.9% of Solar Capital shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.
FS Investment Corporation beats Solar Capital on 7 of the 12 factors compared between the two stocks.
FS Investment Corporation Company Profile
FS Investment Corporation is an externally managed, non-diversified, closed-end management investment company. The Company’s investment objectives are to generate current income and long-term capital appreciation. Its portfolio consists primarily of investments in senior secured loans and second lien secured loans of the private United States middle market companies and subordinated loans of the private United States companies. It may purchase interests in loans or make other debt investments, including investments in senior secured bonds, through secondary market transactions in the over-the-counter market or directly from target companies as primary market or directly originated investments. It invests in a range of industries, including capital goods; consumer services; consumer durables and apparel; materials; commercial and professional services, and diversified financials. Its investment advisor is FB Income Advisor, LLC.
Solar Capital Company Profile
Solar Capital Ltd. is a closed-end, externally managed, non-diversified management investment company. The Company’s investment objective is to generate both current income and capital appreciation through debt and equity investments. It invests in privately held the United States middle market companies. It invests in leveraged middle market companies in the form of senior secured loans, unitranche loans, mezzanine loans and equity securities. It may also invest in public companies that are thinly traded. Its business is focused primarily on the direct origination of investments through portfolio companies or their financial sponsors. Its investments generally range between $5 million and $100 million each. In addition, the Company may invest a portion of its portfolio in other types of investments, which it refers to as opportunistic investments. The Company’s investment activities are managed by Solar Capital Partners, LLC (Solar Capital Partners or the Investment Advisor).
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