Critical Comparison: Stellus Capital Investment Corporation (SCM) & Apollo Investment Corporation (AINV)
Apollo Investment Corporation (NASDAQ: AINV) and Stellus Capital Investment Corporation (NYSE:SCM) are both finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their valuation, earnings, profitability, dividends, risk, analyst recommendations and institutional ownership.
Valuation and Earnings
This table compares Apollo Investment Corporation and Stellus Capital Investment Corporation’s revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|Apollo Investment Corporation||N/A||N/A||N/A||$0.40||14.85|
|Stellus Capital Investment Corporation||N/A||N/A||N/A||$2.12||6.27|
Stellus Capital Investment Corporation is trading at a lower price-to-earnings ratio than Apollo Investment Corporation, indicating that it is currently the more affordable of the two stocks.
Institutional & Insider Ownership
45.8% of Apollo Investment Corporation shares are held by institutional investors. Comparatively, 26.5% of Stellus Capital Investment Corporation shares are held by institutional investors. 0.3% of Apollo Investment Corporation shares are held by company insiders. Comparatively, 4.2% of Stellus Capital Investment Corporation shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.
Apollo Investment Corporation pays an annual dividend of $0.60 per share and has a dividend yield of 10.1%. Stellus Capital Investment Corporation pays an annual dividend of $1.36 per share and has a dividend yield of 10.2%. Apollo Investment Corporation pays out 150.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Stellus Capital Investment Corporation pays out 64.2% of its earnings in the form of a dividend. Stellus Capital Investment Corporation is clearly the better dividend stock, given its higher yield and lower payout ratio.
This is a summary of current recommendations and price targets for Apollo Investment Corporation and Stellus Capital Investment Corporation, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Apollo Investment Corporation||1||4||1||0||2.00|
|Stellus Capital Investment Corporation||0||1||2||0||2.67|
Apollo Investment Corporation currently has a consensus target price of $6.25, suggesting a potential upside of 5.22%. Stellus Capital Investment Corporation has a consensus target price of $15.00, suggesting a potential upside of 12.78%. Given Stellus Capital Investment Corporation’s stronger consensus rating and higher possible upside, analysts plainly believe Stellus Capital Investment Corporation is more favorable than Apollo Investment Corporation.
This table compares Apollo Investment Corporation and Stellus Capital Investment Corporation’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Apollo Investment Corporation||33.04%||9.75%||5.75%|
|Stellus Capital Investment Corporation||68.17%||10.06%||5.01%|
Risk & Volatility
Apollo Investment Corporation has a beta of 0.91, indicating that its stock price is 9% less volatile than the S&P 500. Comparatively, Stellus Capital Investment Corporation has a beta of 0.56, indicating that its stock price is 44% less volatile than the S&P 500.
Stellus Capital Investment Corporation beats Apollo Investment Corporation on 9 of the 12 factors compared between the two stocks.
Apollo Investment Corporation Company Profile
Apollo Investment Corporation is a closed-end, externally managed, non-diversified management investment company. The Company’s investment objective is to generate current income and capital appreciation. It invests primarily in various forms of debt investments, including secured and unsecured debt, loan investments and/or equity in private middle-market companies. It may also invest in the securities of public companies and in structured products and other investments, such as collateralized loan obligations (CLOs) and credit-linked notes (CLNs). Its portfolio also includes equity interests, such as common stock, preferred stock, warrants or options. It invests in investments in the United States secured and unsecured loans, other debt securities and equity, and may also invests a portion of the portfolio in other investment opportunities, including foreign securities and structured products. Apollo Investment Management, L.P. is the investment advisor of the Company.
Stellus Capital Investment Corporation Company Profile
Stellus Capital Investment Corporation is a closed-end, non-diversified management investment company. The Company originates and invests primarily in private middle-market companies through first lien, second lien, unitranche and mezzanine debt financing, with corresponding equity co-investments. The Company’s investment objective is to maximize the total return to its stockholders in the form of current income and capital appreciation. It invests in various sectors, such as business services, energy, general industrial, government services, healthcare, software and specialty finance. Its investment advisor is Stellus Capital Management, LLC (Stellus Capital Management). Stellus Capital Management is responsible for analyzing investment opportunities, conducting research and performing due diligence on investments, negotiating and structuring the Company’s investments, originating prospective investments, and monitoring its investments and portfolio companies on an ongoing basis.
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