Medley Management (NYSE: MDLY) and Fifth Street Asset Management (NASDAQ:FSAM) are both small-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their profitability, institutional ownership, earnings, risk, analyst recommendations, valuation and dividends.

Analyst Recommendations

This is a summary of current recommendations and price targets for Medley Management and Fifth Street Asset Management, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Medley Management 0 3 0 0 2.00
Fifth Street Asset Management 0 1 0 0 2.00

Medley Management presently has a consensus price target of $9.75, suggesting a potential upside of 68.10%. Fifth Street Asset Management has a consensus price target of $4.00, suggesting a potential downside of 2.44%. Given Medley Management’s higher possible upside, research analysts plainly believe Medley Management is more favorable than Fifth Street Asset Management.

Valuation and Earnings

This table compares Medley Management and Fifth Street Asset Management’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Medley Management $67.57 million 0.46 $27.69 million $0.19 30.53
Fifth Street Asset Management $71.87 million 0.89 $35.88 million ($0.14) -29.29

Fifth Street Asset Management has higher revenue and earnings than Medley Management. Fifth Street Asset Management is trading at a lower price-to-earnings ratio than Medley Management, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Medley Management and Fifth Street Asset Management’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Medley Management 2.68% -43.71% 17.11%
Fifth Street Asset Management -0.63% -399.09% 11.43%

Volatility & Risk

Medley Management has a beta of 1.36, indicating that its stock price is 36% more volatile than the S&P 500. Comparatively, Fifth Street Asset Management has a beta of 0.32, indicating that its stock price is 68% less volatile than the S&P 500.

Dividends

Medley Management pays an annual dividend of $0.80 per share and has a dividend yield of 13.8%. Fifth Street Asset Management pays an annual dividend of $0.25 per share and has a dividend yield of 6.1%. Medley Management pays out 421.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Fifth Street Asset Management pays out -178.6% of its earnings in the form of a dividend.

Insider & Institutional Ownership

65.6% of Medley Management shares are held by institutional investors. Comparatively, 8.6% of Fifth Street Asset Management shares are held by institutional investors. 5.1% of Medley Management shares are held by insiders. Comparatively, 86.0% of Fifth Street Asset Management shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Summary

Medley Management beats Fifth Street Asset Management on 9 of the 14 factors compared between the two stocks.

Medley Management Company Profile

Medley Management Inc. is an asset management firm offering yield solutions to retail and institutional investors. The Company operates in the investment management segment. It is focused on credit-related investment strategies, primarily originating senior secured loans to private middle market companies in the United States. The Company generally holds these loans to maturity. Its national direct origination franchise provides capital to the middle market in the United States. The Company has over $4.8 billion of assets under management (AUM) in approximately two business development companies (BDCs), Medley Capital Corporation (MCC) and Sierra Income Corporation (SIC), as well as private investment vehicles. It has over $5 billion of AUM. The Company provides capital to over 300 companies across approximately 35 industries in North America. The Company’s long-dated private funds include MOF I, MOF II and MOF III. Its private funds are managed through partnership structures

Fifth Street Asset Management Company Profile

Fifth Street Asset Management Inc. is an alternative asset manager. The Company provides asset management services to its investment funds (the Fifth Street Funds or the funds), which consist of Fifth Street Finance Corp. (FSC) and Fifth Street Senior Floating Rate Corp. (FSFR), both publicly-traded business development companies (together, the BDCs). Its segment provides asset management services to the Fifth Street Funds. The Company conducts all of its operations through its subsidiaries, Fifth Street Management LLC (FSM), Fifth Street CLO Management LLC (CLO Management) and FSCO GP LLC (FSCO GP). The funds, managed by the Company, provide financing solutions to small and mid-sized companies across their capital structures, mainly in connection with investments by private equity sponsors. It provides credit solutions across the capital structure, including one-stop financing, unitranche debt, senior secured debt, mezzanine debt, equity co-investments and venture debt financing.

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