Critical Review: Garrison Capital (GARS) vs. Oaktree Strategic Income (OCSI)

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Garrison Capital (NASDAQ: OCSI) and Oaktree Strategic Income (NASDAQ:OCSI) are both small-cap finance companies, but which is the superior stock? We will compare the two companies based on the strength of their earnings, risk, profitability, valuation, analyst recommendations, dividends and institutional ownership.

Insider and Institutional Ownership

26.1% of Garrison Capital shares are held by institutional investors. Comparatively, 26.9% of Oaktree Strategic Income shares are held by institutional investors. 6.4% of Garrison 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 large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Profitability

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

Net Margins Return on Equity Return on Assets
Garrison Capital 33.79% 9.53% 4.22%
Oaktree Strategic Income -4.80% 6.75% 3.28%

Analyst Ratings

This is a summary of current recommendations for Garrison Capital and Oaktree Strategic Income, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Garrison Capital 0 0 2 0 3.00
Oaktree Strategic Income 0 0 0 0 N/A

Garrison Capital presently has a consensus target price of $11.00, suggesting a potential upside of 29.41%. Given Garrison Capital’s higher possible upside, analysts plainly believe Garrison Capital is more favorable than Oaktree Strategic Income.

Risk & Volatility

Garrison Capital has a beta of 0.27, suggesting that its share price is 73% less volatile than the S&P 500. Comparatively, Oaktree Strategic Income has a beta of 0.25, suggesting that its share price is 75% less volatile than the S&P 500.

Dividends

Garrison Capital pays an annual dividend of $1.12 per share and has a dividend yield of 13.2%. Oaktree Strategic Income pays an annual dividend of $0.58 per share and has a dividend yield of 6.6%. Garrison Capital pays out 104.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. 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 Garrison 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
Garrison Capital $36.62 million 3.73 $6.22 million $1.07 7.94
Oaktree Strategic Income $46.57 million 5.56 -$8.76 million $0.76 11.55

Garrison Capital has higher earnings, but lower revenue than Oaktree Strategic Income. Garrison 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.

Summary

Garrison Capital beats Oaktree Strategic Income on 10 of the 15 factors compared between the two stocks.

About Garrison Capital

Garrison Capital Inc. is a managed, closed-end, non-diversified management investment company. The Company’s investment objective is to generate current income and capital appreciation by making investments primarily in debt securities and loans of the United States-based middle-market companies, which it defines as those having annual earnings before interest, taxes and depreciation, or EBITDA, of certain amount. It invests or provides direct lending in first lien senior secured loans, second lien senior secured loans, one-stop senior secured loans or unitranche loans, subordinated or mezzanine loans, unsecured consumer loans and to a lesser extent, selected equity co-investments in middle-market companies. The Company intends to generate risk-adjusted net returns by assembling a portfolio of investments. The Company’s investment advisor is Garrison Capital Advisers LLC.

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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