TCP Capital Corp. (NASDAQ: TCPC) and Hercules Capital (NYSE:HTGC) are both small-cap finance companies, but which is the superior stock? We will compare the two companies based on the strength of their dividends, risk, institutional ownership, earnings, analyst recommendations, valuation and profitability.

Analyst Ratings

This is a summary of recent ratings and recommmendations for TCP Capital Corp. and Hercules Capital, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
TCP Capital Corp. 0 0 6 0 3.00
Hercules Capital 1 1 5 0 2.57

TCP Capital Corp. currently has a consensus price target of $18.25, indicating a potential upside of 10.54%. Hercules Capital has a consensus price target of $14.50, indicating a potential upside of 13.81%. Given Hercules Capital’s higher possible upside, analysts plainly believe Hercules Capital is more favorable than TCP Capital Corp..

Dividends

TCP Capital Corp. pays an annual dividend of $1.44 per share and has a dividend yield of 8.7%. Hercules Capital pays an annual dividend of $1.24 per share and has a dividend yield of 9.7%. TCP Capital Corp. pays out 92.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Hercules Capital pays out 134.8% 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 TCP Capital Corp. and Hercules Capital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
TCP Capital Corp. 54.74% 12.93% 7.29%
Hercules Capital 38.69% 12.93% 6.76%

Volatility and Risk

TCP Capital Corp. has a beta of 0.76, suggesting that its stock price is 24% less volatile than the S&P 500. Comparatively, Hercules Capital has a beta of 0.85, suggesting that its stock price is 15% less volatile than the S&P 500.

Earnings & Valuation

This table compares TCP Capital Corp. and Hercules Capital’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
TCP Capital Corp. N/A N/A N/A $1.55 10.65
Hercules Capital $187.39 million 5.63 $140.30 million $0.92 13.85

Hercules Capital has higher revenue and earnings than TCP Capital Corp.. TCP Capital Corp. is trading at a lower price-to-earnings ratio than Hercules Capital, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

53.3% of TCP Capital Corp. shares are owned by institutional investors. Comparatively, 42.6% of Hercules Capital shares are owned by institutional investors. 0.6% of TCP Capital Corp. shares are owned by insiders. Comparatively, 3.9% of Hercules Capital shares are owned 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.

Summary

TCP Capital Corp. beats Hercules Capital on 7 of the 12 factors compared between the two stocks.

About TCP Capital Corp.

TCP Capital Corp. is an externally managed, closed-end, non-diversified management investment company. The Company’s investment objective is to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection. It invests in the debt of middle-market companies, as well as small businesses, including senior secured loans, junior loans, mezzanine debt and bonds. Its investments may include an equity component and may make equity investments directly. It intends to focus on privately negotiated investments in debt of middle-market companies. It may make investments of all kinds and at all levels of the capital structure, including in equity interests, such as preferred or common stock and warrants or options received in connection with its debt investments. As of December 31, 2016, its investment portfolio consisted of 90 portfolio companies. Tennenbaum Capital Partners, LLC is the investment manager and advisor of the Company.

About Hercules Capital

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.

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