THL Credit (NASDAQ: TCRD) and Liberty All-Star Equity Fund (NYSE:USA) are both small-cap finance companies, but which is the better business? We will contrast the two companies based on the strength of their risk, analyst recommendations, earnings, institutional ownership, valuation, dividends and profitabiliy.
Volatility and Risk
THL Credit has a beta of 1.06, suggesting that its share price is 6% more volatile than the S&P 500. Comparatively, Liberty All-Star Equity Fund has a beta of 1.22, suggesting that its share price is 22% more volatile than the S&P 500.
Profitability
This table compares THL Credit and Liberty All-Star Equity Fund’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| THL Credit | 29.81% | 10.22% | 5.66% |
| Liberty All-Star Equity Fund | N/A | N/A | N/A |
Dividends
THL Credit pays an annual dividend of $1.08 per share and has a dividend yield of 11.1%. Liberty All-Star Equity Fund pays an annual dividend of $0.13 per share and has a dividend yield of 2.3%. THL Credit pays out 145.9% 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 breakdown of recent ratings and price targets for THL Credit and Liberty All-Star Equity Fund, as provided by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| THL Credit | 0 | 5 | 2 | 0 | 2.29 |
| Liberty All-Star Equity Fund | 0 | 2 | 2 | 0 | 2.50 |
THL Credit presently has a consensus price target of $10.92, suggesting a potential upside of 12.54%. Liberty All-Star Equity Fund has a consensus price target of $44.50, suggesting a potential upside of 698.92%. Given Liberty All-Star Equity Fund’s stronger consensus rating and higher probable upside, analysts plainly believe Liberty All-Star Equity Fund is more favorable than THL Credit.
Earnings and Valuation
This table compares THL Credit and Liberty All-Star Equity Fund’s gross revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | EBITDA | Earnings Per Share | Price/Earnings Ratio | |
| THL Credit | N/A | N/A | N/A | $0.74 | 13.11 |
| Liberty All-Star Equity Fund | N/A | N/A | N/A | N/A | N/A |
Institutional & Insider Ownership
48.7% of THL Credit shares are owned by institutional investors. Comparatively, 31.1% of Liberty All-Star Equity Fund shares are owned by institutional investors. 0.8% of THL Credit shares are owned by insiders. Comparatively, 0.1% of Liberty All-Star Equity Fund shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.
Summary
THL Credit beats Liberty All-Star Equity Fund on 6 of the 10 factors compared between the two stocks.
About THL Credit
THL Credit, Inc. is an externally managed, non-diversified closed-end management investment company. The Company’s investment objective is to generate both current income and capital appreciation, primarily through investments in privately negotiated debt and equity securities of lower middle market companies. The Company is a direct lender to lower middle-market companies and invests primarily in directly originated first lien senior secured loans, including unitranche investments. In certain instances, it also makes second lien secured loans and subordinated, or mezzanine, debt investments, which may include an associated equity component, such as warrants, preferred stock or similar securities, and direct equity investments. Its first lien senior secured loans may be structured as traditional first lien senior secured loans or as unitranche loans. The Company’s investment activities are managed by THL Credit Advisors LLC.
About Liberty All-Star Equity Fund
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.
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