Hercules Capital (HTGC) vs. Great Elm Capital (GECC) Critical Analysis

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

Institutional & Insider Ownership

38.9% of Hercules Capital shares are held by institutional investors. Comparatively, 21.5% of Great Elm Capital shares are held by institutional investors. 3.2% of Hercules Capital shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Dividends

Hercules Capital pays an annual dividend of $1.24 per share and has a dividend yield of 9.5%. Great Elm Capital pays an annual dividend of $1.00 per share and has a dividend yield of 9.7%. Hercules Capital pays out 136.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Analyst Recommendations

This is a summary of recent recommendations and price targets for Hercules Capital and Great Elm Capital, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Hercules Capital 0 4 7 0 2.64
Great Elm Capital 0 1 2 0 2.67

Hercules Capital presently has a consensus price target of $14.33, indicating a potential upside of 9.35%. Great Elm Capital has a consensus price target of $13.33, indicating a potential upside of 29.20%. Given Great Elm Capital’s stronger consensus rating and higher possible upside, analysts clearly believe Great Elm Capital is more favorable than Hercules Capital.

Profitability

This table compares Hercules Capital and Great Elm Capital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Hercules Capital 39.73% 12.93% 6.75%
Great Elm Capital N/A N/A N/A

Valuation & Earnings

This table compares Hercules Capital and Great Elm Capital’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Hercules Capital $175.05 million 6.30 $68.70 million $0.91 14.40
Great Elm Capital $5.83 million 18.89 -$17.87 million N/A N/A

Hercules Capital has higher revenue and earnings than Great Elm Capital.

Summary

Hercules Capital beats Great Elm Capital on 8 of the 13 factors compared between the two stocks.

Hercules Capital Company Profile

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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