Head-To-Head Analysis: PennantPark Investment Corporation (PNNT) and Fifth Street Senior Floating Rate Corp. (FSFR)

PennantPark Investment Corporation (NASDAQ: PNNT) and Fifth Street Senior Floating Rate Corp. (NASDAQ:FSFR) are both finance companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, analyst recommendations, valuation, dividends, risk, profitability and institutional ownership.

Insider & Institutional Ownership

42.7% of PennantPark Investment Corporation shares are held by institutional investors. Comparatively, 23.3% of Fifth Street Senior Floating Rate Corp. shares are held by institutional investors. 1.9% of PennantPark Investment Corporation shares are held by company insiders. Comparatively, 0.4% of Fifth Street Senior Floating Rate Corp. shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Volatility and Risk

PennantPark Investment Corporation has a beta of 1.26, suggesting that its share price is 26% more volatile than the S&P 500. Comparatively, Fifth Street Senior Floating Rate Corp. has a beta of 0.34, suggesting that its share price is 66% less volatile than the S&P 500.

Analyst Recommendations

This is a breakdown of recent ratings for PennantPark Investment Corporation and Fifth Street Senior Floating Rate Corp., as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
PennantPark Investment Corporation 0 7 2 0 2.22
Fifth Street Senior Floating Rate Corp. 0 2 0 0 2.00

PennantPark Investment Corporation presently has a consensus target price of $8.14, indicating a potential upside of 8.72%. Fifth Street Senior Floating Rate Corp. has a consensus target price of $9.25, indicating a potential upside of 4.64%. Given PennantPark Investment Corporation’s stronger consensus rating and higher possible upside, research analysts clearly believe PennantPark Investment Corporation is more favorable than Fifth Street Senior Floating Rate Corp..

Earnings & Valuation

This table compares PennantPark Investment Corporation and Fifth Street Senior Floating Rate Corp.’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
PennantPark Investment Corporation N/A N/A N/A $0.97 7.72
Fifth Street Senior Floating Rate Corp. N/A N/A N/A $0.47 18.81

PennantPark Investment Corporation is trading at a lower price-to-earnings ratio than Fifth Street Senior Floating Rate Corp., indicating that it is currently the more affordable of the two stocks.

Dividends

PennantPark Investment Corporation pays an annual dividend of $0.72 per share and has a dividend yield of 9.6%. Fifth Street Senior Floating Rate Corp. pays an annual dividend of $0.76 per share and has a dividend yield of 8.6%. PennantPark Investment Corporation pays out 74.2% of its earnings in the form of a dividend. Fifth Street Senior Floating Rate Corp. pays out 161.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. PennantPark Investment Corporation is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares PennantPark Investment Corporation and Fifth Street Senior Floating Rate Corp.’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
PennantPark Investment Corporation 53.92% 9.11% 4.72%
Fifth Street Senior Floating Rate Corp. 29.89% 7.27% 3.83%

Summary

PennantPark Investment Corporation beats Fifth Street Senior Floating Rate Corp. on 12 of the 12 factors compared between the two stocks.

About PennantPark Investment Corporation

PennantPark Investment Corporation is a closed-end, non-diversified investment company. The Company is a business development company. Its objectives are to generate both current income and capital appreciation while seeking to preserve capital through debt and equity investments primarily made to the United States middle-market companies in the form of senior secured debt, mezzanine debt and equity investments. The Company’s debt investments may generally range in maturity from 3 to 10 years and, are made to the United States and to a limited extent, non-United States corporations, partnerships and other business entities, which operate in various industries and geographical regions. In addition, it may invest up to approximately 30% of its portfolio in non-qualifying assets. It invests in sectors, such as aerospace and defense; energy/utilities; auto sector; environmental services, and beverage, among others. PennantPark Investment Advisers, LLC is the Company’s investment advisor.

About Fifth Street Senior Floating Rate Corp.

Fifth Street Senior Floating Rate Corp. is a closed-end, non-diversified management investment company. The Company operates as a specialty finance company. The Company’s investment objective is to maximize its portfolio’s total return by generating current income from its debt investments while seeking to preserve its capital. The Company invests in portfolio companies primarily in the form of senior loans. The Company invests in senior secured loans, including first lien, unitranche and second lien debt instruments. The Company may also invest in unsecured loans, including subordinated loans, issued by private middle market companies, and senior and subordinated loans issued by public companies and equity investments. The senior loans that the Company targets have final maturities of 4 to 7 years. The Company seeks to invest in senior loans made primarily to private middle market companies. Fifth Street Management LLC is the investment advisor of the Company.

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