Prospect Capital (NASDAQ:PSEC) and OHA Investment (NASDAQ:OHAI) are both finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their dividends, valuation, earnings, analyst recommendations, institutional ownership, profitability and risk.
Risk & Volatility
Prospect Capital has a beta of 0.76, indicating that its share price is 24% less volatile than the S&P 500. Comparatively, OHA Investment has a beta of 0.86, indicating that its share price is 14% less volatile than the S&P 500.
This table compares Prospect Capital and OHA Investment’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
This is a breakdown of current ratings and price targets for Prospect Capital and OHA Investment, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Prospect Capital currently has a consensus price target of $5.00, suggesting a potential downside of 24.59%. Given Prospect Capital’s higher probable upside, research analysts clearly believe Prospect Capital is more favorable than OHA Investment.
Earnings and Valuation
This table compares Prospect Capital and OHA Investment’s revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Prospect Capital||$703.77 million||3.46||$144.49 million||$0.85||7.80|
|OHA Investment||$8.47 million||3.19||-$10.25 million||N/A||N/A|
Prospect Capital has higher revenue and earnings than OHA Investment.
Insider and Institutional Ownership
12.5% of Prospect Capital shares are held by institutional investors. Comparatively, 39.6% of OHA Investment shares are held by institutional investors. 11.3% of Prospect Capital shares are held by insiders. Comparatively, 4.5% of OHA Investment shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.
Prospect Capital pays an annual dividend of $0.72 per share and has a dividend yield of 10.9%. OHA Investment pays an annual dividend of $0.08 per share and has a dividend yield of 6.0%. Prospect Capital pays out 84.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Prospect Capital has increased its dividend for 8 consecutive years. Prospect Capital is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Prospect Capital beats OHA Investment on 10 of the 13 factors compared between the two stocks.
About Prospect Capital
Prospect Capital Corporation is a business development company. It specializes in middle market, mature, mezzanine finance, later stage, emerging growth, leveraged buyouts, refinancing, acquisitions, recapitalizations, turnaround, growth capital, development, capital expenditures and subordinated debt tranches of collateralized loan obligations, cash flow term loans, market place lending and bridge transactions. It also makes real estate investments particularly in multi-family residential real estate asset class. The fund makes secured debt, senior debt, senior and secured term loans, unitranche debt, first-lien and second lien, private debt, private equity, mezzanine debt, and equity investments in private and microcap public businesses. It focuses on both primary origination and secondary loans/portfolios and invests in situations like debt financings for private equity sponsors, acquisitions, dividend recapitalizations, growth financings, bridge loans, cash flow term loans, real estate financings/investments. It also focuses on investing in small-sized and medium-sized private companies rather than large public companies. The fund typically invests across all industry sectors, with a particular expertise in the energy and industrial sectors. It invests in aerospace and defense, chemicals, conglomerate services, consumer services, ecological, electronics, financial services, machinery, manufacturing, media, pharmaceuticals, retail, software, specialty minerals, textiles and leather, transportation, oil and gas production, coal production, materials, industrials, consumer discretionary, information technology, utilities, pipeline, storage, power generation and distribution, renewable and clean energy, oilfield services, healthcare, food and beverage, education, business services, and other select sectors. It prefers to invest in the United States and Canada. The fund seeks to invest between $10 million to $500 million per transaction in companies with EBITDA between $5 million and $150 million, sales value between $25 million and $500 million, and enterprise value between $5 million and $1000 million. It fund also co-invests for larger deals. The fund seeks control acquisitions by providing multiple levels of the capital structure. The fund focuses on sole, agented, club, or syndicated deals.
About OHA Investment
OHA Investment Corporation is a business development company specializing in investments in small and mid size and middle market private companies. The fund typically invests in acquisitions, buyouts, growth, development, expansion, monetizations, revitalization, restructuring, recapitalizations, and special situations. It seeks to invest in energy, natural resources, niche manufacturing, value added distribution, business services, healthcare products and services, consumer services, etc. Within energy, the fund focuses on oil and gas production and development including limited exploration or technology risk; midstream including pipelines, storage, gathering and processing systems; coal mining, production, and services; and oilfield manufacturing. It seeks to invest in companies based in the United States. The fund primarily invests between $5 million and $100 million in its portfolio companies. It invests in the form of unitranche (combined senior and subordinated debt), secured, senior, and subordinate debt; convertible debt; preferred equity; project equity; loans; securities of foreign companies; production payments, net profits interests, and similar investments; and senior secured and mezzanine loans and may receive equity investments in portfolio companies in connection with such investments. The fund makes asset and project based investments in private companies and can also invest in public companies. It seeks to make exit by allowing the portfolio company to refinance the facility often with senior debt or by the sale of the portfolio company's assets or the entire company.
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