Liberty All-Star Equity Fund (NYSE: USA) and OFS Capital Corporation (NASDAQ:OFS) are both small-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, institutional ownership, risk, analyst recommendations, profitability, valuation and dividends.

Institutional & Insider Ownership

31.1% of Liberty All-Star Equity Fund shares are owned by institutional investors. Comparatively, 25.5% of OFS Capital Corporation shares are owned by institutional investors. 0.1% of Liberty All-Star Equity Fund shares are owned by insiders. Comparatively, 0.0% of OFS Capital Corporation shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Volatility & Risk

Liberty All-Star Equity Fund has a beta of 1.22, suggesting that its stock price is 22% more volatile than the S&P 500. Comparatively, OFS Capital Corporation has a beta of 0.45, suggesting that its stock price is 55% less volatile than the S&P 500.

Dividends

Liberty All-Star Equity Fund pays an annual dividend of $0.13 per share and has a dividend yield of 2.3%. OFS Capital Corporation pays an annual dividend of $1.36 per share and has a dividend yield of 10.5%. OFS Capital Corporation pays out 125.9% 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 Liberty All-Star Equity Fund and OFS Capital Corporation, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Liberty All-Star Equity Fund 0 2 2 0 2.50
OFS Capital Corporation 1 1 3 0 2.40

Liberty All-Star Equity Fund currently has a consensus price target of $44.50, suggesting a potential upside of 693.23%. OFS Capital Corporation has a consensus price target of $14.25, suggesting a potential upside of 10.47%. Given Liberty All-Star Equity Fund’s stronger consensus rating and higher possible upside, equities research analysts plainly believe Liberty All-Star Equity Fund is more favorable than OFS Capital Corporation.

Valuation and Earnings

This table compares Liberty All-Star Equity Fund and OFS Capital Corporation’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Liberty All-Star Equity Fund N/A N/A N/A N/A N/A
OFS Capital Corporation N/A N/A N/A $1.08 11.94

Profitability

This table compares Liberty All-Star Equity Fund and OFS Capital Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Liberty All-Star Equity Fund N/A N/A N/A
OFS Capital Corporation 31.02% 9.43% 4.69%

Summary

Liberty All-Star Equity Fund beats OFS Capital Corporation on 6 of the 11 factors compared between the two stocks.

Liberty All-Star Equity Fund Company Profile

Liberty All-Star Equity Fund is a diversified, closed-end management investment fund. The Fund seeks total investment return comprising long-term capital appreciation and current income through investing primarily in a diversified portfolio of equity securities. It allocates its portfolio assets on an approximately equal basis among several independent investment management organizations having various investment styles recommended and monitored by its investment advisor. It invests at least 80% of its net assets in a diversified portfolio of equity securities. The Fund invests in various sectors, including financials, information technology, healthcare, consumer discretionary, consumer staples, industrials, energy, materials, real estate, utilities and telecommunication services. Its investment managers invest primarily for pension funds, endowments, foundations and other institutions. The Fund’s investment advisor is ALPS Advisors, Inc.

OFS Capital Corporation Company Profile

OFS Capital Corporation (OFS Capital) is an externally managed, closed-end, non-diversified management investment company. The Company’s investment objective is to provide its shareholders with both current income and capital appreciation primarily through debt investments and equity investments. It focuses primarily on middle-market companies in the United States, including senior secured loans, including first-lien, second-lien and unitranche loans, as well as subordinated loans, and warrants and other minority equity securities. The Company may make investments directly or through OFS SBIC I, LP (SBIC I LP), its investment company subsidiary. It focuses on investments in loans, in which OFS Advisor’s investment professionals have expertise, including investments in first-lien, unitranche, second-lien, and mezzanine loans and, to a lesser extent, on warrants and other equity securities. The Company’s investment activities are managed by OFS Capital Management, LLC (OFS Advisor).

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