FS Investment Corporation (NYSE: FSIC) and Medley Capital Corporation (NYSE:MCC) are both finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their analyst recommendations, institutional ownership, dividends, risk, valuation, profitability and earnings.

Dividends

FS Investment Corporation pays an annual dividend of $0.89 per share and has a dividend yield of 10.4%. Medley Capital Corporation pays an annual dividend of $0.64 per share and has a dividend yield of 10.5%. FS Investment Corporation pays out 87.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Medley Capital Corporation pays out -640.0% of its earnings in the form of a dividend. Medley Capital Corporation is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares FS Investment Corporation and Medley Capital Corporation’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 $1.02 8.38
Medley Capital Corporation N/A N/A N/A ($0.10) -60.70

Medley Capital Corporation is trading at a lower price-to-earnings ratio than FS Investment Corporation, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

32.5% of FS Investment Corporation shares are owned by institutional investors. Comparatively, 29.6% of Medley Capital Corporation shares are owned by institutional investors. 1.0% of FS Investment Corporation shares are owned by company insiders. Comparatively, 8.7% of Medley Capital Corporation shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for FS Investment Corporation and Medley Capital Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
FS Investment Corporation 0 4 0 0 2.00
Medley Capital Corporation 0 5 0 0 2.00

FS Investment Corporation presently has a consensus price target of $10.00, suggesting a potential upside of 16.96%. Medley Capital Corporation has a consensus price target of $7.00, suggesting a potential upside of 15.32%. Given FS Investment Corporation’s higher possible upside, research analysts plainly believe FS Investment Corporation is more favorable than Medley Capital Corporation.

Risk and Volatility

FS Investment Corporation has a beta of 0.98, suggesting that its share price is 2% less volatile than the S&P 500. Comparatively, Medley Capital Corporation has a beta of 1.18, suggesting that its share price is 18% more volatile than the S&P 500.

Profitability

This table compares FS Investment Corporation and Medley Capital Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
FS Investment Corporation 59.88% 8.92% 4.92%
Medley Capital Corporation -6.07% 8.04% 3.92%

Summary

FS Investment Corporation beats Medley Capital Corporation on 7 of the 11 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.

Medley Capital Corporation Company Profile

Medley Capital Corporation is a non-diversified closed-end management investment company. The Company’s investment objective is to generate current income and capital appreciation by lending directly to privately-held middle market companies, primarily through directly originated transactions to help these companies expand their business, refinance and make acquisitions. Its investment portfolio includes senior secured first lien term loans, senior secured second lien term loans, unitranche, senior secured first lien notes, subordinated notes and warrants and minority equity securities. It may invest up to 100% of its assets in securities acquired directly from issuers in privately negotiated transactions. Its portfolio of investments includes industries, including banking, finance, insurance and real estate; construction and building; healthcare and pharmaceuticals; beverage and food, and telecommunications. MCC Advisors LLC is the Company’s investment advisor.

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