Critical Survey: TriplePoint Venture Growth BDC (NYSE:TPVG) versus Hercules Capital (NYSE:HTGC)

Hercules Capital (NYSE:HTGC) and TriplePoint Venture Growth BDC (NYSE:TPVG) are both finance companies, but which is the better stock? We will compare the two businesses based on the strength of their profitability, dividends, risk, institutional ownership, valuation, earnings and analyst recommendations.

Analyst Ratings

This is a breakdown of current recommendations for Hercules Capital and TriplePoint Venture Growth BDC, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Hercules Capital	0	2	6	1	2.89
TriplePoint Venture Growth BDC	2	5	0	0	1.71

Hercules Capital currently has a consensus target price of $20.32, indicating a potential upside of 23.53%. TriplePoint Venture Growth BDC has a consensus target price of $6.25, indicating a potential upside of 9.27%. Given Hercules Capital’s stronger consensus rating and higher probable upside, analysts plainly believe Hercules Capital is more favorable than TriplePoint Venture Growth BDC.

Risk & Volatility

Hercules Capital has a beta of 0.84, indicating that its share price is 16% less volatile than the S&P 500. Comparatively, TriplePoint Venture Growth BDC has a beta of 1.36, indicating that its share price is 36% more volatile than the S&P 500.

Profitability

This table compares Hercules Capital and TriplePoint Venture Growth BDC’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Hercules Capital	60.05%	16.13%	8.11%
TriplePoint Venture Growth BDC	36.02%	12.88%	5.76%

Insider & Institutional Ownership

19.7% of Hercules Capital shares are owned by institutional investors. Comparatively, 12.8% of TriplePoint Venture Growth BDC shares are owned by institutional investors. 1.8% of Hercules Capital shares are owned by company insiders. Comparatively, 1.5% of TriplePoint Venture Growth BDC shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Dividends

Hercules Capital pays an annual dividend of $1.60 per share and has a dividend yield of 9.7%. TriplePoint Venture Growth BDC pays an annual dividend of $0.92 per share and has a dividend yield of 16.1%. Hercules Capital pays out 93.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. TriplePoint Venture Growth BDC pays out 108.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Hercules Capital has increased its dividend for 1 consecutive years.

Earnings and Valuation

This table compares Hercules Capital and TriplePoint Venture Growth BDC”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Hercules Capital	$493.59 million	6.06	$262.97 million	$1.72	9.56
TriplePoint Venture Growth BDC	$108.65 million	2.13	$32.05 million	$0.85	6.73

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

Summary

Hercules Capital beats TriplePoint Venture Growth BDC on 16 of the 18 factors compared between the two stocks.

About Hercules Capital

Hercules Capital, Inc. is a business development company. The firm specializing in providing venture debt, debt, senior secured loans, and growth capital to privately held venture capital-backed companies at all stages of development from startups to expansion stage including select publicly listed companies and select special opportunity lower middle market companies that require additional capital to fund acquisitions, recapitalizations and refinancing and established-stage companies. The firm provides growth capital financing solutions for capital extension; management buy-out and corporate spin-out financing solutions; company, asset specific, or intellectual property acquisition financing; convertible, subordinated and/or mezzanine loans; domestic and international corporate expansion; vendor financing; revenue acceleration by sales and marketing development, and manufacturing expansion. It provides asset-based financing with a focus on cash flow; accounts receivable facilities; equipment loans or leases; equipment acquisition; facilities build-out and/or expansion; working capital revolving lines of credit; inventory. The firm also provides bridge financing to IPO or mergers and acquisitions or technology acquisition; dividend recapitalizations and other sources of investor liquidity; cash flow financing to protect against share price volatility; competitor acquisition; pre-IPO financing for extra cash on the balance sheet; public company financing to continue asset growth and production capacity; short-term bridge financing; and strategic and intellectual property acquisition financings. It also focuses on customized financing solutions, emerging growth, mid venture, and late venture financing. The firm invests primarily in structured debt with warrants and, to a lesser extent, in senior debt and equity investments. The firm generally seeks to invest in companies that have been operating for at least six to 12 months prior to the date of their investment. It prefers to invest in technology, SaaS Finance, energy technology, sustainable and renewable technology, and life sciences. Within technology the firm focuses on advanced specialty materials and chemicals; communication and networking, consumer and business products; consumer products and services, digital media and consumer internet; electronics and computer hardware; enterprise software and services; gaming; healthcare services; information services; business services; media, content and information; mobile; resource management; security software; semiconductors; semiconductors and hardware; and software sector. Within energy technology, it invests in agriculture; clean technology; energy and renewable technology, fuels, and power technology; geothermal; smart grid and energy efficiency and monitoring technologies; solar; and wind. Within life sciences, the firm invests in biopharmaceuticals; biotechnology tools; diagnostics; drug discovery, drug platform, development, and delivery; medical devices and equipment; surgical devices; therapeutics; pharma services; and specialty pharmaceuticals. Within sustainable and renewables, it invests in Vehicle Technology, Energy Generation and Storage, Ag Technology, Advanced Materials, and Industry 4.0. It also invests in educational services. The firm invests primarily in United States based companies and considers investment in the West Coast, Mid-Atlantic regions, Southeast and Midwest, particularly in the areas of software, biotech, and information services. The firm prefers to invest between $5 million and $200 million in equity per transactions. It invests generally between $1 million and $40 million in companies focused primarily on business services, communications, electronics, hardware, and healthcare services. The firm invests primarily in private companies but also have investments in public companies. For equity investments, the firm seeks to represent a controlling interest in its portfolio companies which may exceed 25% of the voting securities of such companies. The firm seeks to invest a limited portion of its assets in equipment-based loans to early-stage prospective portfolio companies. These loans are generally for amounts up to $3 million but may be up to $15 million for certain energy technology venture investments. The firm allows certain debt investments have the right to convert a portion of the debt investment into equity. It also co-invests with other private equity firms. The firm seeks to exit its investments through initial public offering, a private sale of equity interest to a third party, a merger or an acquisition of the company or a purchase of the equity position by the company or one of its stockholders. The firm has structured debt with warrants which typically have maturities of between two and seven years with an average of three years; senior debt with an investment horizon of less than three years; equipment loans with an investment horizon ranging from three to four years; and equity related securities with an investment horizon ranging from three to seven years. The firm prefers to invest through its balance sheet capital. The firm formerly known as Hercules Technology Growth Capital, Inc. Hercules Capital, Inc. was founded in December 2003 and is based in San Mateo, California with additional offices in North America and Europe.

About TriplePoint Venture Growth BDC

TriplePoint Venture Growth BDC Corp. is a business development company specializing investments in venture capital-backed companies at the growth stage investments. It also provides debt financing to venture growth space companies which includes growth capital loans, secured and customized loans, equipment financings, revolving loans and direct equity investments. The fund seeks to invest in e-commerce, entertainment, technology and life sciences sector. Within technology the areas of focus include: Security, wireless communication equipments, network system and software, business applications software, conferencing equipments/services .big data, cloud computing, data storage, electronics, energy efficiency, hardware, information services, internet and media, networking, semiconductors, software, software as a service, and other technology related subsectors and within life sciences the areas of focus include: biotechnology, bio fuels/bio mass, diagnostic testing and bioinformatics, drug delivery, drug discovery, healthcare information systems, healthcare services, medical, surgical and therapeutic devices, pharmaceuticals and other life science related subsectors. Within growth capital loans it invests between $5 million and $50 million, for equipment financings it invests between $5 million and $25 million, for revolving loans it invests between $1 million and $25 million, and for direct equity investments it may invest between $0.1 million and $5 million (generally not exceeding 5% of the company’s total equity). The debt financing products are typically structured as lines of credit and it invests through warrants and secured loans. It targeted returns between 10% and 18%. It does not take board seat in the company.