Head to Head Comparison: Amern Cap Sr Fl/COM (ACSF) vs. Capital Southwest (CSWC)

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Amern Cap Sr Fl/COM (NASDAQ: CSWC) and Capital Southwest (NASDAQ:CSWC) are both small-cap finance companies, but which is the better business? We will compare the two companies based on the strength of their valuation, earnings, dividends, analyst recommendations, risk, profitability and institutional ownership.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Amern Cap Sr Fl/COM and Capital Southwest, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Amern Cap Sr Fl/COM 0 0 0 0 N/A
Capital Southwest 0 0 4 0 3.00

Capital Southwest has a consensus price target of $20.25, suggesting a potential upside of 8.70%. Given Capital Southwest’s higher possible upside, analysts plainly believe Capital Southwest is more favorable than Amern Cap Sr Fl/COM.

Volatility and Risk

Amern Cap Sr Fl/COM has a beta of 1.11, meaning that its share price is 11% more volatile than the S&P 500. Comparatively, Capital Southwest has a beta of 0.21, meaning that its share price is 79% less volatile than the S&P 500.

Dividends

Amern Cap Sr Fl/COM pays an annual dividend of $1.16 per share and has a dividend yield of 9.4%. Capital Southwest pays an annual dividend of $1.16 per share and has a dividend yield of 6.2%. Capital Southwest pays out 114.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Capital Southwest has raised its dividend for 2 consecutive years.

Valuation and Earnings

This table compares Amern Cap Sr Fl/COM and Capital Southwest’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Amern Cap Sr Fl/COM $17.52 million 7.02 $5.70 million N/A N/A
Capital Southwest $35.13 million 8.64 $39.30 million $1.01 18.45

Capital Southwest has higher revenue and earnings than Amern Cap Sr Fl/COM.

Institutional and Insider Ownership

23.4% of Amern Cap Sr Fl/COM shares are owned by institutional investors. Comparatively, 56.1% of Capital Southwest shares are owned by institutional investors. 0.2% of Amern Cap Sr Fl/COM shares are owned by insiders. Comparatively, 6.7% of Capital Southwest shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Profitability

This table compares Amern Cap Sr Fl/COM and Capital Southwest’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Amern Cap Sr Fl/COM 30.24% 3.27% 1.82%
Capital Southwest 118.20% 5.82% 4.28%

Summary

Capital Southwest beats Amern Cap Sr Fl/COM on 11 of the 14 factors compared between the two stocks.

Amern Cap Sr Fl/COM Company Profile

American Capital Senior Floating, Ltd. is a business development company specializing in first lien and second lien floating rate loans. It also invests in equity tranches of collateralized loan obligations equity tranches of collateralized loan obligations.

Capital Southwest Company Profile

Capital Southwest Corporation is a business development company specializing in credit and private equity and venture capital investments in middle market companies, mezzanine, later stage, mature, late venture, emerging growth, buyouts, recapitalizations and growth capital investments. It does not invest in startups, publicly traded companies, real estate developments, project finance opportunities, oil and gas exploration businesses, troubled companies, turnarounds, and companies in which significant senior management is departing. In lower middle market, the firm typically invests in growth financing, bolt-on acquisitions, new platform acquisitions, refinancing, dividend recapitalizations, sponsor-led buyouts, and management buyouts situations. The investment structures are Unitranche debt, subordinated debt, senior debt, first and second lien debt, and preferred and common equity. The firm makes equity co-investments alongside debt investments, up to 20% of total check and only makes non-control investments. It prefers to invest in Industrial manufacturing and services, value-added distribution, healthcare products and services, business services, specialty chemicals, food and beverage, tech-enabled services and SaaS models. The firm seeks to invest in energy services and products, industrial technologies, and specialty chemicals and products. Within energy services and products, the firm seeks to invest in each segment of the industry, including upstream, midstream and downstream, excluding exploration and production with a focus on differentiated products and services, equipment and tool rental, consumable products, and drilling and completion chemicals. Within industrial technologies, it seeks to invest in automation and process controls, handling and packaging equipment, industrial filtration and fluid handling, measurement, monitoring and testing, professional tools, and sensors and instrumentation. Within and specialty chemicals and products, the firm seeks to invest in businesses that develop and manufacture highly differentiated chemicals and products including adhesives, coatings and sealants, catalysts and absorbents, cosmeceuticals, fine chemicals, flavors and fragrances, performance lubricants, polymers, plastics and composites, chemical dispensing and filtration equipment, professional and industrial trade consumables and tools, engineered solutions for HVAC, plumbing, and electrical installations, specified high performance materials for fire protection and oilfield applications. It may also invest in exceptional opportunities in building products. The firm seeks to invest in the United States. The firm seeks to make investments ranging from $5 to $25 million in securities. It seeks to make equity investments up to $5 million and debt investments between $5 million and $20 million and co-invest in transaction size upto $40 million. It prefers to invest in companies with revenues approaching above $10 million, profitable operations, historical growth rate of at least 15 percent per year, EBITDA between $3 million and $50 million. In addition to making direct investments, the firm allocates capital to syndicated first and second lien term loans in the upper middle market. Criteria for Upper Middle Market Syndicated 1st Lien is EBITDA Size more than $30 million, Closing Leverage greater than 4 times, investment hold size between $5 million and $7 million, investment yield greater than 6.5%. Criteria for Upper Middle Market Syndicated 2nd Lien is EBITDA Size more than $50 million, Closing Leverage greater than 6 times, investment hold size between $5 million and $7 million, investment yield greater than 9%. It prefers to take a majority and minority stake. The firm has the flexibility to hold investments for very long period in its portfolio companies. It may also invest through warrants. The firm prefers to take Board participation in its portfolio companies. Capital Southwest Corporation was founded on April 19, 1961 and is based in Dallas, Texas.

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