Financial Analysis: Capital Southwest (CSWC) & Cannae (CNNE)

Capital Southwest (NASDAQ: CSWC) and Cannae (NYSE:CNNE) are both small-cap finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their risk, earnings, valuation, institutional ownership, dividends, analyst recommendations and profitability.

Analyst Recommendations

This is a breakdown of current ratings for Capital Southwest and Cannae, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Capital Southwest 0 1 4 0 2.80
Cannae 0 0 0 0 N/A

Capital Southwest currently has a consensus target price of $20.00, suggesting a potential upside of 22.85%. Given Capital Southwest’s higher possible upside, research analysts plainly believe Capital Southwest is more favorable than Cannae.

Valuation & Earnings

This table compares Capital Southwest and Cannae’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Capital Southwest $23.50 million 11.10 $23.47 million $1.88 8.66
Cannae $1.34 billion 0.91 $650.00 million ($0.50) -34.32

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

Profitability

This table compares Capital Southwest and Cannae’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Capital Southwest 91.90% 5.51% 4.64%
Cannae 7.05% 1.76% 0.86%

Institutional and Insider Ownership

60.0% of Capital Southwest shares are owned by institutional investors. Comparatively, 70.9% of Cannae shares are owned by institutional investors. 5.9% of Capital Southwest shares are owned by insiders. Comparatively, 6.0% of Cannae shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Dividends

Capital Southwest pays an annual dividend of $1.04 per share and has a dividend yield of 6.4%. Cannae does not pay a dividend. Capital Southwest pays out 55.3% of its earnings in the form of a dividend.

Summary

Capital Southwest beats Cannae on 9 of the 14 factors compared between the two stocks.

Capital Southwest Company Profile

Capital Southwest Corporation is an investment company that specializes in providing customized financing to middle market companies in a range of industry segments located primarily in the United States. The Company is a specialty lending company. Its principal investment objective is to produce risk-adjusted returns by generating current income from debt investments and capital appreciation from its equity and equity related investments. It focuses on partnering with business owners, management teams and financial sponsors to provide financing solutions to fund growth, changes of control, or other corporate events. In allocating future investments, it focuses on investing in senior and subordinated debt securities secured by security interests in portfolio company assets, coupled with equity interests. It targets senior and subordinated investments in the lower middle market and private loan transactions, as well as first and second lien syndicated loans in middle market companies.

Cannae Company Profile

Cannae Holdings, Inc. is a diversified holding company. The Company has investments in a variety of industries including Restaurants, Technology Enabled Healthcare Services, Financial Services and more. The Company holds majority and minority equity investment stakes in a number of entities, including Ceridian Holdings, LLC, American Blue Ribbon Holdings, and LLC and T-System Holding LLC.

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