Horizon Technology Finance (HRZN) & Prospect Capital (PSEC) Critical Comparison
Horizon Technology Finance (NASDAQ: HRZN) and Prospect Capital (NASDAQ:PSEC) are both finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their valuation, risk, analyst recommendations, dividends, earnings, profitability and institutional ownership.
Valuation and Earnings
This table compares Horizon Technology Finance and Prospect Capital’s gross revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Horizon Technology Finance||$32.98 million||3.78||-$4.91 million||$0.57||18.98|
|Prospect Capital||$701.05 million||3.49||$252.90 million||$0.57||11.88|
Volatility & Risk
Horizon Technology Finance has a beta of 0.8, suggesting that its stock price is 20% less volatile than the S&P 500. Comparatively, Prospect Capital has a beta of 0.48, suggesting that its stock price is 52% less volatile than the S&P 500.
Horizon Technology Finance pays an annual dividend of $1.20 per share and has a dividend yield of 11.1%. Prospect Capital pays an annual dividend of $0.72 per share and has a dividend yield of 10.6%. Horizon Technology Finance pays out 210.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Prospect Capital pays out 126.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.
This table compares Horizon Technology Finance and Prospect Capital’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Horizon Technology Finance||24.46%||9.96%||6.31%|
This is a summary of current ratings and target prices for Horizon Technology Finance and Prospect Capital, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Horizon Technology Finance||2||3||1||0||1.83|
Horizon Technology Finance currently has a consensus price target of $10.75, indicating a potential downside of 0.65%. Prospect Capital has a consensus price target of $6.50, indicating a potential downside of 3.99%. Given Horizon Technology Finance’s stronger consensus rating and higher probable upside, analysts plainly believe Horizon Technology Finance is more favorable than Prospect Capital.
Insider and Institutional Ownership
17.1% of Horizon Technology Finance shares are owned by institutional investors. Comparatively, 14.8% of Prospect Capital shares are owned by institutional investors. 1.3% of Horizon Technology Finance shares are owned by insiders. Comparatively, 7.1% of Prospect Capital shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.
Horizon Technology Finance beats Prospect Capital on 10 of the 16 factors compared between the two stocks.
Horizon Technology Finance Company Profile
Horizon Technology Finance Corporation is an externally managed, closed-end, non-diversified management investment company. The Company’s investment objective is to maximize investment portfolio’s total return by generating current income from the debt investments it makes and capital appreciation from the warrants it receives when making such debt investments. It lends to and invests in development-stage companies in the technology, life science, healthcare information and services and cleantech industries (collectively Target Industries). It is focused on making secured debt investments (Venture Loans) to venture capital backed companies in its Target Industries. As of December 31, 2016, its debt investment portfolio consisted of 44 debt investments. As of December 31, 2016, the Company held warrants to purchase stock, predominantly preferred stock, in 78 portfolio companies, equity positions in five portfolio companies and success fee arrangements in 11 portfolio companies.
Prospect Capital Company Profile
Prospect Capital Corporation is a financial services company. The Company primarily lends to and invests in middle market privately held companies. The Company is a closed-end investment company. Its investment objective is to generate both current income and long-term capital appreciation through debt and equity investments. The Company invests primarily in senior and subordinated debt and equity of private companies in need of capital for acquisitions, divestitures, growth, development, recapitalizations and other purposes. The Company makes investments, including lending in private equity sponsored transactions, lending directly to companies not owned by private equity firms, control investments in corporate operating companies, control investments in financial companies, investments in structured credit, real estate investments, investments in syndicated debt, aircraft leasing and online lending. The Company is managed by its investment advisor, Prospect Capital Management L.P.
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