Alcentra Capital Corp. (NASDAQ: ABDC) and Hercules Capital (NYSE:HTGC) are both small-cap finance companies, but which is the better business? We will compare the two companies based on the strength of their dividends, institutional ownership, profitabiliy, earnings, analyst recommendations, valuation and risk.
Dividends
Alcentra Capital Corp. pays an annual dividend of $1.36 per share and has a dividend yield of 10.9%. Hercules Capital pays an annual dividend of $1.24 per share and has a dividend yield of 9.3%. Alcentra Capital Corp. pays out 340.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Hercules Capital pays out 190.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.
Institutional and Insider Ownership
43.6% of Alcentra Capital Corp. shares are held by institutional investors. Comparatively, 43.9% of Hercules Capital shares are held by institutional investors. 5.0% of Alcentra Capital Corp. shares are held by insiders. Comparatively, 3.9% of Hercules Capital shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.
Valuation and Earnings
This table compares Alcentra Capital Corp. and Hercules Capital’s top-line revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | EBITDA | Earnings Per Share | Price/Earnings Ratio | |
| Alcentra Capital Corp. | N/A | N/A | N/A | $0.40 | 31.23 |
| Hercules Capital | $182.48 million | 6.03 | $136.62 million | $0.65 | 20.45 |
Hercules Capital has higher revenue and earnings than Alcentra Capital Corp.. Hercules Capital is trading at a lower price-to-earnings ratio than Alcentra Capital Corp., indicating that it is currently the more affordable of the two stocks.
Profitability
This table compares Alcentra Capital Corp. and Hercules Capital’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Alcentra Capital Corp. | 13.81% | 11.56% | 7.07% |
| Hercules Capital | 26.75% | 13.10% | 6.85% |
Risk and Volatility
Alcentra Capital Corp. has a beta of 0.76, suggesting that its stock price is 24% less volatile than the S&P 500. Comparatively, Hercules Capital has a beta of 0.82, suggesting that its stock price is 18% less volatile than the S&P 500.
Analyst Ratings
This is a breakdown of current ratings and recommmendations for Alcentra Capital Corp. and Hercules Capital, as provided by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Alcentra Capital Corp. | 0 | 3 | 2 | 0 | 2.40 |
| Hercules Capital | 0 | 3 | 4 | 0 | 2.57 |
Alcentra Capital Corp. presently has a consensus price target of $13.75, suggesting a potential upside of 10.09%. Hercules Capital has a consensus price target of $14.60, suggesting a potential upside of 9.86%. Given Alcentra Capital Corp.’s higher probable upside, equities analysts clearly believe Alcentra Capital Corp. is more favorable than Hercules Capital.
Summary
Hercules Capital beats Alcentra Capital Corp. on 10 of the 14 factors compared between the two stocks.
Alcentra Capital Corp. Company Profile
Alcentra Capital Corporation is a specialty finance company that operates as a non-diversified, closed-end management investment company. The Company operates as a business development company and a regulated investment company. It provides customized debt and equity financing solutions to lower middle-market companies, which are companies having annual earnings, before interest, taxes, depreciation and amortization of between $5 million and $15 million, and/or revenues of between $10 million and $100 million. Its investments range in size from $5 million to $15 million. Its investment objective is to generate both current income and capital appreciation primarily by making direct investments in lower middle-market companies in the form of senior debt, unitranche, second lien, subordinated debt and, to a lesser extent, senior debt and minority equity investments. Its investment focus is to make loans to, and selected equity investments in, privately-held lower-middle-market companies.
Hercules Capital Company Profile
Hercules Capital, Inc. is a specialty finance company. The Company is an internally managed, non-diversified, closed-end investment company. The Company focuses on providing senior secured venture growth loans to venture capital-backed companies in a range of technology, life sciences, and sustainable and renewable technology industries. The Company’s investment objective is to maximize its portfolio total return by generating current income from its debt investments and capital appreciation from its warrant and equity-related investments. The Company’s primary business objectives are to increase its net income, net operating income and net asset value (NAV) by investing in structured debt with warrants and equity of venture capital-backed companies in technology-related industries with attractive current yields and the potential for equity appreciation and realized gains. The Company focuses its investments in companies active in the technology industry sub-sectors.
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