Contrasting Stellus Capital Investment (NYSE:SCM) and Amalgamated Financial (NASDAQ:AMAL)

Amalgamated Financial (NASDAQ:AMAL) and Stellus Capital Investment (NYSE:SCM) are both small-cap finance companies, but which is the superior business? We will compare the two businesses based on the strength of their risk, institutional ownership, earnings, dividends, valuation, profitability and analyst recommendations.

Profitability

This table compares Amalgamated Financial and Stellus Capital Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Amalgamated Financial	22.97%	14.75%	1.30%
Stellus Capital Investment	29.77%	10.72%	3.95%

Analyst Ratings

This is a breakdown of recent recommendations for Amalgamated Financial and Stellus Capital Investment, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Amalgamated Financial	0	2	1	0	2.33
Stellus Capital Investment	0	3	0	0	2.00

Amalgamated Financial currently has a consensus target price of $33.50, suggesting a potential upside of 1.33%. Stellus Capital Investment has a consensus target price of $13.00, suggesting a potential upside of 3.72%. Given Stellus Capital Investment’s higher possible upside, analysts plainly believe Stellus Capital Investment is more favorable than Amalgamated Financial.

Earnings and Valuation

This table compares Amalgamated Financial and Stellus Capital Investment”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Amalgamated Financial	$434.51 million	2.28	$106.43 million	$3.32	9.96
Stellus Capital Investment	$104.74 million	3.46	$45.85 million	$1.09	11.50

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

Dividends

Amalgamated Financial pays an annual dividend of $0.56 per share and has a dividend yield of 1.7%. Stellus Capital Investment pays an annual dividend of $1.60 per share and has a dividend yield of 12.8%. Amalgamated Financial pays out 16.9% of its earnings in the form of a dividend. Stellus Capital Investment pays out 146.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Amalgamated Financial has raised its dividend for 4 consecutive years.

Risk & Volatility

Amalgamated Financial has a beta of 0.84, indicating that its stock price is 16% less volatile than the S&P 500. Comparatively, Stellus Capital Investment has a beta of 0.66, indicating that its stock price is 34% less volatile than the S&P 500.

Insider & Institutional Ownership

75.9% of Amalgamated Financial shares are held by institutional investors. Comparatively, 13.2% of Stellus Capital Investment shares are held by institutional investors. 1.3% of Amalgamated Financial shares are held by insiders. Comparatively, 4.0% of Stellus Capital Investment shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Summary

Amalgamated Financial beats Stellus Capital Investment on 10 of the 17 factors compared between the two stocks.

About Amalgamated Financial

Amalgamated Financial Corp. operates as the bank holding company for Amalgamated Bank that provides commercial and retail banking, investment management, and trust and custody services for commercial and retail customers in the United States. The company accepts various deposit products, including non-interest bearing accounts, interest-bearing demand products, savings accounts, money market accounts, NOW accounts, and certificates of deposit. It also provides various commercial loans comprising commercial and industrial, multifamily mortgage, and commercial real estate loans; residential mortgage loans; and retail loans, such as residential real estate, consumer solar, and consumer and other loans. In addition, the company offers online banking, bill payment, online cash management, and safe deposit box rental services; debit and ATM cards; and trust, custody, and investment management services comprising asset safekeeping, corporate actions, income collections, proxy, account transition, asset transfers, and conversion management services. Further, it provides investment products, such as funds spanning equity, fixed-income, real estate, and alternative investment products; and brokerage, asset management, and insurance products. Amalgamated Financial Corp. was founded in 1923 and is headquartered in New York, New York.

About Stellus Capital Investment

Stellus Capital Investment Corporation is a business development company specializing in investments in private middle-market companies. It invests through first lien, second lien, unitranche, and mezzanine debt financing, often with a corresponding equity investment. The fund prefers to invest in US and Canada. The fund seeks to invest in companies with an EBITDA between $5 million and $50 million.