Special Opportunities Fund (NYSE: SPE) and Prospect Capital (NASDAQ:PSEC) are both finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their profitability, valuation, analyst recommendations, earnings, institutional ownership, risk and dividends.

Profitability

This table compares Special Opportunities Fund and Prospect Capital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Special Opportunities Fund N/A N/A N/A
Prospect Capital 27.00% 8.63% 4.75%

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Special Opportunities Fund and Prospect Capital, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Special Opportunities Fund 0 0 2 0 3.00
Prospect Capital 1 3 0 0 1.75

Special Opportunities Fund currently has a consensus target price of $9.63, indicating a potential downside of 39.99%. Prospect Capital has a consensus target price of $6.17, indicating a potential downside of 9.18%. Given Prospect Capital’s higher probable upside, analysts plainly believe Prospect Capital is more favorable than Special Opportunities Fund.

Insider and Institutional Ownership

45.2% of Special Opportunities Fund shares are owned by institutional investors. Comparatively, 15.7% of Prospect Capital shares are owned by institutional investors. 22.4% of Special Opportunities Fund shares are owned by insiders. Comparatively, 7.1% of Prospect Capital shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Risk & Volatility

Special Opportunities Fund has a beta of 0.78, meaning that its share price is 22% less volatile than the S&P 500. Comparatively, Prospect Capital has a beta of 0.55, meaning that its share price is 45% less volatile than the S&P 500.

Earnings & Valuation

This table compares Special Opportunities Fund and Prospect Capital’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Special Opportunities Fund N/A N/A N/A N/A N/A
Prospect Capital $701.05 million 3.49 $252.90 million $0.51 13.31

Prospect Capital has higher revenue and earnings than Special Opportunities Fund.

Dividends

Special Opportunities Fund pays an annual dividend of $0.56 per share and has a dividend yield of 3.5%. Prospect Capital pays an annual dividend of $0.72 per share and has a dividend yield of 10.6%. Prospect Capital pays out 141.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

About Special Opportunities Fund

Special Opportunities Fund, Inc. (the Fund) is a diversified closed-end management investment company. The Fund’s investment objective is to achieve total return. The Fund’s investment portfolio consists of investment companies, common stocks, commodity partnerships, preferred stocks, money market funds, corporate notes, liquidating trusts, corporate bonds, promissory notes, senior unsecured notes, warrants and rights. The Company also invests in various sectors, such as construction materials; consumer finance; healthcare equipment and supplies; independent power and renewable electricity producers; insurance; personal products; professional services; real estate investment trusts, and special purpose acquisition vehicles. The Fund also invests in closed-end funds, auction rate preferred securities and business development companies, among others. Bulldog Investors, LLC acts as an investment advisor for the Fund.

About Prospect Capital

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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