Saratoga Investment (SAR) versus Morningstar (MORN) Critical Comparison

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Saratoga Investment (NASDAQ: MORN) and Morningstar (NASDAQ:MORN) are both finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their dividends, earnings, profitability, institutional ownership, analyst recommendations, valuation and risk.

Insider & Institutional Ownership

14.0% of Saratoga Investment shares are owned by institutional investors. Comparatively, 37.9% of Morningstar shares are owned by institutional investors. 24.8% of Saratoga Investment shares are owned by insiders. Comparatively, 57.5% of Morningstar shares are owned by 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.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Saratoga Investment and Morningstar, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Saratoga Investment 0 3 4 0 2.57
Morningstar 0 0 0 0 N/A

Saratoga Investment presently has a consensus target price of $23.83, indicating a potential upside of 0.27%. Given Saratoga Investment’s higher possible upside, analysts clearly believe Saratoga Investment is more favorable than Morningstar.

Risk & Volatility

Saratoga Investment has a beta of 0.1, suggesting that its share price is 90% less volatile than the S&P 500. Comparatively, Morningstar has a beta of 0.79, suggesting that its share price is 21% less volatile than the S&P 500.

Profitability

This table compares Saratoga Investment and Morningstar’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Saratoga Investment 50.76% 10.52% 4.12%
Morningstar 16.15% 17.53% 10.28%

Earnings and Valuation

This table compares Saratoga Investment and Morningstar’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Saratoga Investment $38.62 million 4.59 $17.67 million $2.27 10.47
Morningstar $911.70 million 6.41 $136.90 million N/A N/A

Morningstar has higher revenue and earnings than Saratoga Investment.

Dividends

Saratoga Investment pays an annual dividend of $2.04 per share and has a dividend yield of 8.6%. Morningstar pays an annual dividend of $1.00 per share and has a dividend yield of 0.7%. Saratoga Investment pays out 89.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Saratoga Investment has raised its dividend for 2 consecutive years and Morningstar has raised its dividend for 6 consecutive years.

Summary

Morningstar beats Saratoga Investment on 11 of the 15 factors compared between the two stocks.

About Saratoga Investment

Saratoga Investment Corp. is a business development company specializing in leveraged and management buyouts, acquisition financings, growth financings, recapitalization, debt refinancing, and transitional financing transactions at the lower end of middle market companies. It structures its investments as debt and equity by investing through first and second lien loans, mezzanine debt, co-investments, select high yield bonds, senior secured bonds, unsecured bonds, and preferred and common equity. It seeks to invest in the United States. The firm primarily invests $5 million to $20 million in companies having EBITDA of $2 million or greater and revenues of $8 million to $150 million. It invests through direct lending as well as participation in loan syndicates. The firm was formerly known as GSC Investment Corp. Saratoga Investment Corp. is based in New York, New York with an additional office in Florham Park, New Jersey.

About Morningstar

Morningstar, Inc. provides independent investment research services in North America, Europe, Australia, and Asia. It offers a line of data, research, and software tools on a range of investment offerings, including managed investment products, publicly listed companies, fixed income securities, private capital markets, and real-time global market data for financial advisors, asset managers, retirement plan providers and sponsors, and individual and institutional investors. The company offers Morningstar Data, an investment data spanning various investment databases, including pricing and commodity data; Morningstar Direct, an institutional investment research platform; investment management solutions, which include Morningstar Managed Portfolios, the strategist models on third-party managed account platforms, as well as services for institutional asset management, asset allocation, and manager selection; institutional asset management services for asset management firms, broker-dealers, and insurance providers; Morningstar Advisor Workstation, a Web-based investment planning system; and Morningstar.com, a Website for individual investors. It also provides Morningstar Enterprise Components, a set of tools and capabilities that builds customized Websites or enhances existing solutions; Morningstar Research, which includes equity research and manager research; Morningstar Credit Ratings that provides new issue and surveillance ratings and analysis for structured credits, as well as operational risk assessment services; Morningstar Indexes, a set of investment indexes; workplace solutions, such as retirement advice and managed accounts, fiduciary services, and custom models; a mobile application, excel plug-in, data feeds, and data solutions; equity and manager research, and credit rating services; and institutional asset management, asset allocation, and manager selection services. The company was founded in 1984 and is headquartered in Chicago, Illinois.

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