Analyzing Medley Capital (MCC) & Solar Capital (SLRC)

Medley Capital (NYSE: MCC) and Solar Capital (NASDAQ:SLRC) are both small-cap financials companies, but which is the better stock? We will compare the two businesses based on the strength of their valuation, profitability, dividends, analyst recommendations, risk, earnings and institutional ownership.

Earnings & Valuation

This table compares Medley Capital and Solar Capital’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Medley Capital $96.26 million 2.99 -$15.07 million ($0.28) -18.89
Solar Capital $151.84 million 5.88 $106.81 million $1.68 12.58

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

Institutional & Insider Ownership

29.2% of Medley Capital shares are owned by institutional investors. Comparatively, 63.1% of Solar Capital shares are owned by institutional investors. 8.7% of Medley Capital shares are owned by insiders. Comparatively, 5.9% of Solar Capital shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Volatility & Risk

Medley Capital has a beta of 1.22, indicating that its stock price is 22% more volatile than the S&P 500. Comparatively, Solar Capital has a beta of 0.55, indicating that its stock price is 45% less volatile than the S&P 500.

Dividends

Medley Capital pays an annual dividend of $0.64 per share and has a dividend yield of 12.1%. Solar Capital pays an annual dividend of $1.60 per share and has a dividend yield of 7.6%. Medley Capital pays out -228.6% of its earnings in the form of a dividend. Solar Capital pays out 95.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Medley Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a breakdown of current ratings for Medley Capital and Solar Capital, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Medley Capital 0 3 0 0 2.00
Solar Capital 0 1 4 0 2.80

Medley Capital presently has a consensus price target of $6.17, indicating a potential upside of 16.57%. Solar Capital has a consensus price target of $23.67, indicating a potential upside of 12.01%. Given Medley Capital’s higher probable upside, equities analysts plainly believe Medley Capital is more favorable than Solar Capital.

Profitability

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

Net Margins Return on Equity Return on Assets
Medley Capital -15.66% 7.50% 3.61%
Solar Capital 50.29% 7.32% 4.01%

Summary

Solar Capital beats Medley Capital on 10 of the 16 factors compared between the two stocks.

About Medley Capital

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.

About Solar Capital

Solar Capital Ltd. is a closed-end, externally managed, non-diversified management investment company. The Company’s investment objective is to generate both current income and capital appreciation through debt and equity investments. It invests in privately held the United States middle market companies. It invests in leveraged middle market companies in the form of senior secured loans, unitranche loans, mezzanine loans and equity securities. It may also invest in public companies that are thinly traded. Its business is focused primarily on the direct origination of investments through portfolio companies or their financial sponsors. Its investments generally range between $5 million and $100 million each. In addition, the Company may invest a portion of its portfolio in other types of investments, which it refers to as opportunistic investments. The Company’s investment activities are managed by Solar Capital Partners, LLC (Solar Capital Partners or the Investment Advisor).

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