Hercules Capital (NYSE: HTGC) and NeXt Innovation Corp common stock (NASDAQ:GSVC) are both small-cap finance companies, but which is the better stock? We will compare the two businesses based on the strength of their earnings, valuation, profitability, analyst recommendations, institutional ownership, risk and dividends.

Analyst Ratings

This is a breakdown of recent recommendations for Hercules Capital and NeXt Innovation Corp common stock, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Hercules Capital 0 1 9 0 2.90
NeXt Innovation Corp common stock 0 0 1 0 3.00

Hercules Capital presently has a consensus price target of $14.58, indicating a potential upside of 16.41%. NeXt Innovation Corp common stock has a consensus price target of $11.00, indicating a potential upside of 54.71%. Given NeXt Innovation Corp common stock’s stronger consensus rating and higher possible upside, analysts plainly believe NeXt Innovation Corp common stock is more favorable than Hercules Capital.

Profitability

This table compares Hercules Capital and NeXt Innovation Corp common stock’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Hercules Capital 46.86% 12.02% 6.19%
NeXt Innovation Corp common stock -769.78% -7.79% -4.11%

Institutional & Insider Ownership

39.0% of Hercules Capital shares are owned by institutional investors. Comparatively, 34.3% of NeXt Innovation Corp common stock shares are owned by institutional investors. 3.7% of Hercules Capital shares are owned by company insiders. Comparatively, 1.0% of NeXt Innovation Corp common stock shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Dividends

Hercules Capital pays an annual dividend of $1.24 per share and has a dividend yield of 9.9%. NeXt Innovation Corp common stock does not pay a dividend. Hercules Capital pays out 106.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Valuation & Earnings

This table compares Hercules Capital and NeXt Innovation Corp common stock’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Hercules Capital $190.88 million 5.72 $78.99 million $1.16 10.79
NeXt Innovation Corp common stock $850,000.00 176.24 $17.56 million ($0.95) -7.48

Hercules Capital has higher revenue and earnings than NeXt Innovation Corp common stock. NeXt Innovation Corp common stock is trading at a lower price-to-earnings ratio than Hercules Capital, indicating that it is currently the more affordable of the two stocks.

Risk and Volatility

Hercules Capital has a beta of 0.73, meaning that its stock price is 27% less volatile than the S&P 500. Comparatively, NeXt Innovation Corp common stock has a beta of 1.33, meaning that its stock price is 33% more volatile than the S&P 500.

Summary

Hercules Capital beats NeXt Innovation Corp common stock on 10 of the 15 factors compared between the two stocks.

Hercules Capital Company Profile

Hercules Capital, Inc., formerly known as Hercules Technology Growth Capital, Inc., is a business development company 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, seed, startups, early stage, 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, 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, development and delivery; medical devices and equipment; surgical devices; therapeutics; pharma services; and specialty pharmaceuticals. 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. It invests generally between $1 million to $40 million in companies with revenues of $10 million to $200 million, generating EBITDA of $2 million to $15 million, 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. Hercules Capital, Inc. was founded in December 2003 and is based in Palo Alto, California with additional offices in Hartford, Connecticut; Boston, Massachusetts; Elmhurst, Illinois; Santa Monica, California; McLean, Virginia; New York, New York; Radnor, Pennsylvania; and Washington, District of Columbia.

NeXt Innovation Corp common stock Company Profile

GSV Capital Corp. (GSV Capital) is an externally managed, non-diversified closed-end management investment company. The Company’s investment objective is to maximize its portfolio’s total return, principally by seeking capital gains on its equity and equity-related investments. The Company invests principally in the equity securities, which are venture-capital-backed emerging companies. The Company acquires its investments through direct investments with portfolio companies, secondary marketplaces for private companies and negotiations with selling stockholders. The Company may also invest in select publicly traded equity securities or certain non-United States companies that otherwise meet its investment criteria. It seeks to invest approximately 90% of its portfolio in late-stage companies and the remaining approximately 10% in emerging companies that fit within its targeted areas. Its investment activities are managed by its investment advisor, GSV Asset Management, LLC.

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