StoneCastle Financial Corp (NASDAQ: BANX) and Prospect Capital Corporation (NASDAQ:PSEC) are both finance companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, profitability, analyst recommendations, valuation, risk, dividends and institutional ownership.

Dividends

StoneCastle Financial Corp pays an annual dividend of $1.52 per share. Prospect Capital Corporation pays an annual dividend of $0.72 per share and has a dividend yield of 12.9%. StoneCastle Financial Corp pays out 87.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Prospect Capital Corporation pays out 102.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Risk & Volatility

StoneCastle Financial Corp has a beta of 0.2, suggesting that its share price is 80% less volatile than the S&P 500. Comparatively, Prospect Capital Corporation has a beta of 0.51, suggesting that its share price is 49% less volatile than the S&P 500.

Insider and Institutional Ownership

33.4% of StoneCastle Financial Corp shares are owned by institutional investors. Comparatively, 15.2% of Prospect Capital Corporation shares are owned by institutional investors. 8.0% of StoneCastle Financial Corp shares are owned by insiders. Comparatively, 7.1% of Prospect Capital Corporation shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Profitability

This table compares StoneCastle Financial Corp and Prospect Capital Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
StoneCastle Financial Corp 66.25% N/A N/A
Prospect Capital Corporation 36.08% 8.98% 4.94%

Earnings and Valuation

This table compares StoneCastle Financial Corp and Prospect Capital Corporation’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio NetIncome Earnings Per Share Price/Earnings Ratio
StoneCastle Financial Corp $17.03 0.00 $7.01 $1.74 N/A
Prospect Capital Corporation $701.05 2.86 $252.90 $0.70 7.94

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

Analyst Recommendations

This is a summary of current recommendations for StoneCastle Financial Corp and Prospect Capital Corporation, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
StoneCastle Financial Corp 0 0 4 0 3.00
Prospect Capital Corporation 1 3 0 0 1.75

Given StoneCastle Financial Corp’s stronger consensus rating and higher probable upside, research analysts clearly believe StoneCastle Financial Corp is more favorable than Prospect Capital Corporation.

Summary

StoneCastle Financial Corp beats Prospect Capital Corporation on 9 of the 15 factors compared between the two stocks.

About StoneCastle Financial Corp

StoneCastle Financial Corp. is a non-diversified, closed-end management investment company. The Company’s primary investment objective is to provide stockholders with current income, and to a lesser extent capital appreciation. The Company generally invests in the senior debt, subordinated debt, preferred shares and common stock of community banks. The Company’s investment portfolio includes term loans, debt securities, trust preferred securities, preferred shares of credit securitization, preferred securities, convertible preferred stock, common stock, exchange traded fund, limited partnership interest and money market fund. The Company invests in bank issuers of various locations, such as California, Colorado, Florida, Georgia, Illinois, Kansas, Maine, Maryland, New Jersey, New York, Ohio, North Carolina, Oklahoma, South Carolina, Texas and West Virginia.

About Prospect Capital Corporation

Prospect Capital Corporation is a financial services company. The Company primarily lends to and invests in middle market privately held companies. The Company is a closed-end investment company. Its investment objective is to generate both current income and long-term capital appreciation through debt and equity investments. The Company invests primarily in senior and subordinated debt and equity of private companies in need of capital for acquisitions, divestitures, growth, development, recapitalizations and other purposes. The Company makes investments, including lending in private equity sponsored transactions, lending directly to companies not owned by private equity firms, control investments in corporate operating companies, control investments in financial companies, investments in structured credit, real estate investments, investments in syndicated debt, aircraft leasing and online lending. The Company is managed by its investment advisor, Prospect Capital Management L.P.

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