Monroe Capital (NASDAQ:MRCC) and Barings BDC (NYSE:BBDC) are both small-cap finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, valuation, risk, dividends, analyst recommendations, institutional ownership and earnings.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Monroe Capital and Barings BDC, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Monroe Capital 0 4 1 0 2.20
Barings BDC 0 1 1 0 2.50

Monroe Capital presently has a consensus target price of $12.83, suggesting a potential upside of 16.35%. Barings BDC has a consensus target price of $13.00, suggesting a potential upside of 34.44%. Given Barings BDC’s stronger consensus rating and higher probable upside, analysts plainly believe Barings BDC is more favorable than Monroe Capital.

Valuation and Earnings

This table compares Monroe Capital and Barings BDC’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Monroe Capital $51.11 million 4.41 $12.15 million $1.40 7.88
Barings BDC $123.00 million 4.03 -$28.65 million $1.55 6.24

Monroe Capital has higher earnings, but lower revenue than Barings BDC. Barings BDC is trading at a lower price-to-earnings ratio than Monroe Capital, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Monroe Capital and Barings BDC’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Monroe Capital 12.15% 11.44% 6.12%
Barings BDC -50.26% 1.51% 0.79%

Risk and Volatility

Monroe Capital has a beta of 0.86, indicating that its share price is 14% less volatile than the S&P 500. Comparatively, Barings BDC has a beta of 0.75, indicating that its share price is 25% less volatile than the S&P 500.

Insider and Institutional Ownership

24.5% of Monroe Capital shares are held by institutional investors. Comparatively, 59.3% of Barings BDC shares are held by institutional investors. 1.9% of Monroe Capital shares are held by insiders. Comparatively, 3.5% of Barings BDC shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Dividends

Monroe Capital pays an annual dividend of $1.40 per share and has a dividend yield of 12.7%. Barings BDC pays an annual dividend of $0.40 per share and has a dividend yield of 4.1%. Monroe Capital pays out 100.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Barings BDC pays out 25.8% of its earnings in the form of a dividend.

Summary

Monroe Capital beats Barings BDC on 8 of the 15 factors compared between the two stocks.

Monroe Capital Company Profile

Monroe Capital Corporation is a business development company specializing in senior, unitranche and junior secured debt and to a lesser extent, unsecured debt and equity investments, and buyouts in middle-market companies. The fund prefers to invest in casinos and gaming, broadcasting, publishing, alcoholic beverage and tobacco distribution, oil and gas, insurance, pharmaceuticals and bio sciences, aerospace and defense, commercial printing, natural rubber, glass, container and packaging, metals and mining, and real estate. It focuses to invest in the United States and Canada. The fund focuses on companies with a maximum of $25 million in EBITDA per year.

Barings BDC Company Profile

Barings BDC, Inc. (NYSE:BBDC) is a business development company specializing in private equity and mezzanine investments. It focuses on leveraged buyouts, management buyouts, ESOPs, change of control transactions, acquisition financings, growth financing, and recapitalizations in lower middle market, mature, and later stage companies. The firm prefers to make investments in many business sectors including manufacturing, distribution, transportation, energy, communications, health services, restaurants, media, and others. It primarily invests in companies located throughout the United States, with an emphasis on the Southeast and Midatlantic. The firm makes equity investments between $1 million and $25 million and debt investments between $5 million and $30 million per transaction, in companies having annual revenues between $20 million and $200 million and EBITDA between $3 million and $35 million and can also co-invest. It typically makes investments between $5 million and $35 million. It primarily invests in senior subordinated debt securities secured by second lien security interests in portfolio company assets, coupled with equity interests. The firm also invests in senior debt securities secured by first lien security interests in portfolio companies. Triangle Capital Corporation was incorporated on October 10, 2006 and is based in Raleigh, North Carolina.

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