Hercules Capital (NYSE: HTGC) and Invesco California Value Municipal Income Trust (NYSE:VCV) are both small-cap finance companies, but which is the superior business? We will compare the two businesses based on the strength of their risk, institutional ownership, earnings, dividends, valuation, profitabiliy and analyst recommendations.

Insider & Institutional Ownership

44.2% of Hercules Capital shares are held by institutional investors. Comparatively, 11.8% of Invesco California Value Municipal Income Trust shares are held by institutional investors. 3.9% of Hercules Capital shares are held by insiders. Comparatively, 1.0% of Invesco California Value Municipal Income Trust shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Analyst Ratings

This is a breakdown of recent recommendations for Hercules Capital and Invesco California Value Municipal Income Trust, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Hercules Capital 0 2 4 0 2.67
Invesco California Value Municipal Income Trust 0 0 0 0 N/A

Hercules Capital currently has a consensus target price of $15.00, suggesting a potential upside of 12.36%. Given Hercules Capital’s higher possible upside, equities analysts plainly believe Hercules Capital is more favorable than Invesco California Value Municipal Income Trust.

Profitability

This table compares Hercules Capital and Invesco California Value Municipal Income Trust’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Hercules Capital 26.75% 13.10% 6.85%
Invesco California Value Municipal Income Trust N/A N/A N/A

Dividends

Hercules Capital pays an annual dividend of $1.24 per share and has a dividend yield of 9.3%. Invesco California Value Municipal Income Trust pays an annual dividend of $0.64 per share and has a dividend yield of 4.9%. Hercules Capital pays out 190.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Valuation and Earnings

This table compares Hercules Capital and Invesco California Value Municipal Income Trust’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Hercules Capital $182.48 million 6.06 $136.62 million $0.65 20.54
Invesco California Value Municipal Income Trust N/A N/A N/A N/A N/A

Hercules Capital has higher revenue and earnings than Invesco California Value Municipal Income Trust.

Risk & Volatility

Hercules Capital has a beta of 0.82, indicating that its stock price is 18% less volatile than the S&P 500. Comparatively, Invesco California Value Municipal Income Trust has a beta of -0.1, indicating that its stock price is 110% less volatile than the S&P 500.

Summary

Hercules Capital beats Invesco California Value Municipal Income Trust on 10 of the 11 factors compared between the two stocks.

Hercules Capital Company Profile

Hercules Capital, Inc. is a specialty finance company. The Company is an internally managed, non-diversified, closed-end investment company. The Company focuses on providing senior secured venture growth loans to venture capital-backed companies in a range of technology, life sciences, and sustainable and renewable technology industries. The Company’s investment objective is to maximize its portfolio total return by generating current income from its debt investments and capital appreciation from its warrant and equity-related investments. The Company’s primary business objectives are to increase its net income, net operating income and net asset value (NAV) by investing in structured debt with warrants and equity of venture capital-backed companies in technology-related industries with attractive current yields and the potential for equity appreciation and realized gains. The Company focuses its investments in companies active in the technology industry sub-sectors.

Invesco California Value Municipal Income Trust Company Profile

Invesco Van Kampen California Value Municipal Income Trust (the Trust), formerly Invesco California Value Municipal Income Trust, is a diversified, closed-end management investment trust. The Trust’s investment objective is to seek to provide common shareholders with a high level of current income exempt from federal and California income taxes, consistent with preservation of capital. The Trust will invest substantially all of its assets in California municipal securities rated investment grade at the time of investment. The Trust seeks to achieve its investment objective by investing primarily in California municipal securities that are rated investment grade at the time of investment. Municipal securities include municipal bonds, municipal notes, municipal commercial paper and lease obligations. Invesco Advisers, Inc. serves as its investment advisor.

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