Head-To-Head Review: Rand Capital (NASDAQ:RAND) vs. Saratoga Investment (NYSE:SAR)

Rand Capital (NASDAQ:RAND) and Saratoga Investment (NYSE:SAR) are both small-cap finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their institutional ownership, profitability, analyst recommendations, dividends, earnings, risk and valuation.

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Rand Capital and Saratoga Investment, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Rand Capital	1	0	0	0	1.00
Saratoga Investment	0	5	0	0	2.00

Saratoga Investment has a consensus price target of $23.00, indicating a potential upside of 3.53%. Given Saratoga Investment’s stronger consensus rating and higher probable upside, analysts clearly believe Saratoga Investment is more favorable than Rand Capital.

Dividends

Rand Capital pays an annual dividend of $1.16 per share and has a dividend yield of 11.3%. Saratoga Investment pays an annual dividend of $3.00 per share and has a dividend yield of 13.5%. Rand Capital pays out -37.4% of its earnings in the form of a dividend. Saratoga Investment pays out 128.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Risk & Volatility

Rand Capital has a beta of 0.08, meaning that its share price is 92% less volatile than the S&P 500. Comparatively, Saratoga Investment has a beta of 0.54, meaning that its share price is 46% less volatile than the S&P 500.

Earnings & Valuation

This table compares Rand Capital and Saratoga Investment”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Rand Capital	$6.47 million	4.70	-$8.04 million	($3.10)	-3.30
Saratoga Investment	$125.71 million	2.88	$36.60 million	$2.33	9.53

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

Profitability

This table compares Rand Capital and Saratoga Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Rand Capital	-162.06%	5.87%	5.75%
Saratoga Investment	29.12%	9.29%	3.17%

Insider & Institutional Ownership

19.1% of Saratoga Investment shares are owned by institutional investors. 68.2% of Rand Capital shares are owned by insiders. Comparatively, 10.0% of Saratoga Investment shares are owned 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

Saratoga Investment beats Rand Capital on 11 of the 15 factors compared between the two stocks.

About Rand Capital

Rand Capital Corporation is a business development company specializing in subordinated debt with warrants or preferred equity and venture capital investments. Within private equity, the firm specializing in capital growth and lower middle market investments. Within venture capital, it specializing in early to late-stage private businesses. It does not prefer to invest in real estate sector. It prefers to invest in software, professional services, manufacturing, consumer, healthcare, automotive and public d stocks. It prefers to invest in East or Midwest U.S. operations sectors. It typically invests between $0.75 million and $5 million with initial target size of $1.5 million. It seeks to invest in companies having more than $2 million in revenue or having excess of $1.5 million and up to $5 million in EBITDA. It prefers to be a minority stake and seeks to take a Board seat in its portfolio companies. It typically holds its investments for a period up to five years.

About Saratoga Investment

Saratoga Investment Corp. is a business development company specializing in leveraged and management buyouts, acquisition financings, growth financings, recapitalization, debt refinancing, and transitional financing transactions at the lower end of middle market companies. It structures its investments as debt and equity by investing through first and second lien loans, mezzanine debt, co-investments, select high yield bonds, senior secured bonds, unsecured bonds, and preferred and common equity. The firm prefers to invest in aerospace, automotive aftermarket and services, business products and services, consumer products and services, education, environmental services, industrial services, financial services, food and beverage, healthcare products and services, logistics, distribution, manufacturing, restaurants services, food services, software services, technology services, specialty chemical, media and telecommunications. It seeks to invest in the United States. The firm primarily invests $5 million to $50 million in companies having EBITDA of $2 million or greater and revenues of $8 million to $250 million. The firm prefer to take a majority stake. It invests through direct lending as well as participation in loan syndicates. The firm was formerly known as GSC Investment Corp. Saratoga Investment Corp. was formed on 2007 and is based in New York, New York with an additional office in Florham Park, New Jersey.