Reviewing OHA Investment (OHAI) and OFS Capital (OFS)

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OHA Investment (NASDAQ:OHAI) and OFS Capital (NASDAQ:OFS) are both small-cap finance companies, but which is the better business? We will contrast the two companies based on the strength of their profitability, dividends, analyst recommendations, institutional ownership, valuation, risk and earnings.

Profitability

This table compares OHA Investment and OFS Capital’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
OHA Investment -42.73% 2.61% 1.13%
OFS Capital 46.21% 9.15% 4.50%

Risk & Volatility

OHA Investment has a beta of 0.67, indicating that its share price is 33% less volatile than the S&P 500. Comparatively, OFS Capital has a beta of 0.64, indicating that its share price is 36% less volatile than the S&P 500.

Valuation and Earnings

This table compares OHA Investment and OFS Capital’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
OHA Investment $10.27 million 2.69 -$31.10 million N/A N/A
OFS Capital $33.43 million 4.54 $7.90 million $1.28 8.88

OFS Capital has higher revenue and earnings than OHA Investment.

Analyst Recommendations

This is a summary of recent recommendations for OHA Investment and OFS Capital, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
OHA Investment 0 0 0 0 N/A
OFS Capital 0 0 1 0 3.00

OFS Capital has a consensus target price of $15.00, suggesting a potential upside of 32.04%. Given OFS Capital’s higher possible upside, analysts plainly believe OFS Capital is more favorable than OHA Investment.

Institutional and Insider Ownership

29.0% of OHA Investment shares are owned by institutional investors. Comparatively, 24.5% of OFS Capital shares are owned by institutional investors. 4.5% of OHA Investment shares are owned by insiders. Comparatively, 0.0% of OFS Capital shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Dividends

OHA Investment pays an annual dividend of $0.08 per share and has a dividend yield of 5.8%. OFS Capital pays an annual dividend of $1.36 per share and has a dividend yield of 12.0%. 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.

Summary

OFS Capital beats OHA Investment on 9 of the 14 factors compared between the two stocks.

OHA Investment Company Profile

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.

OFS Capital Company Profile

OFS Capital Corporation is a business development company specializing in direct and fund investments as well as add-on acquisitions. It does not invest in operational turnarounds or start-up businesses. For direct, it specializes in debt and structured equity investments, recapitalizations and refinancing, management and leveraged buyouts, acquisition financings, shareholder liquidity events, growth capital, independent sponsor transactions, ESOPs, and minority investments in the lower middle market companies. It invests in the aerospace and defense, business services, consumer products and services, food and beverage, health care services, specialty chemicals, transportation and logistics, distribution, franchising, and industrial and niche manufacturing sectors. The fund invests in companies based in United States. It seeks to invest between $3 million and $20 million in companies with revenues between $10 million and $200 million, Annual EBITDA between $3 million and $30 million, and Enterprise value between $10 million and $500 million. The fund seeks to invest in companies with debt values between $5 million and $25 million. The fund uses senior secured, unitranche loans, first-lien, second-lien, mezzanine loans, warrants, and preferred equity securities and common equity securities. It prefers to take a minority stake in the investments made. It also co-invests with its partners for additional capital.

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