Analyzing OFS Capital (OFS) & Oaktree Strategic Income (OCSI)

OFS Capital (NASDAQ: OFS) and Oaktree Strategic Income (NASDAQ:OCSI) 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, institutional ownership, valuation, analyst recommendations, dividends, earnings and risk.

Profitability

This table compares OFS Capital and Oaktree Strategic Income’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
OFS Capital 19.01% 8.71% 4.55%
Oaktree Strategic Income -8.28% 6.91% 3.43%



Dividends

OFS Capital pays an annual dividend of $1.36 per share and has a dividend yield of 11.3%. Oaktree Strategic Income pays an annual dividend of $0.58 per share and has a dividend yield of 7.0%. OFS Capital pays out 106.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Oaktree Strategic Income pays out 76.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Earnings and Valuation

This table compares OFS Capital and Oaktree Strategic Income’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
OFS Capital $33.43 million 4.80 $7.90 million $1.28 9.38
Oaktree Strategic Income $46.57 million 5.21 -$8.76 million $0.76 10.83

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

Risk & Volatility

OFS Capital has a beta of 0.48, indicating that its stock price is 52% less volatile than the S&P 500. Comparatively, Oaktree Strategic Income has a beta of 0.25, indicating that its stock price is 75% less volatile than the S&P 500.

Insider & Institutional Ownership

27.5% of OFS Capital shares are held by institutional investors. Comparatively, 28.1% of Oaktree Strategic Income shares are held by institutional investors. 0.0% of OFS Capital shares are held by company insiders. Comparatively, 0.4% of Oaktree Strategic Income shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Analyst Ratings

This is a breakdown of recent ratings and price targets for OFS Capital and Oaktree Strategic Income, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
OFS Capital 0 1 1 0 2.50
Oaktree Strategic Income 0 2 0 0 2.00

OFS Capital currently has a consensus price target of $14.00, indicating a potential upside of 16.57%. Oaktree Strategic Income has a consensus price target of $9.25, indicating a potential upside of 12.39%. Given OFS Capital’s stronger consensus rating and higher probable upside, equities analysts clearly believe OFS Capital is more favorable than Oaktree Strategic Income.

Summary

OFS Capital beats Oaktree Strategic Income on 10 of the 16 factors compared between the two stocks.

About OFS Capital

OFS Capital Corporation (OFS Capital) is an externally managed, closed-end, non-diversified management investment company. The Company’s investment objective is to provide its shareholders with both current income and capital appreciation primarily through debt investments and equity investments. It focuses primarily on middle-market companies in the United States, including senior secured loans, including first-lien, second-lien and unitranche loans, as well as subordinated loans, and warrants and other minority equity securities. The Company may make investments directly or through OFS SBIC I, LP (SBIC I LP), its investment company subsidiary. It focuses on investments in loans, in which OFS Advisor’s investment professionals have expertise, including investments in first-lien, unitranche, second-lien, and mezzanine loans and, to a lesser extent, on warrants and other equity securities. The Company’s investment activities are managed by OFS Capital Management, LLC (OFS Advisor).

About Oaktree Strategic Income

Oaktree Strategic Income Corporation, formerly 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 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. The Company’s investment advisor is Oaktree Capital Management, L.P.

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