PennantPark Investment (NASDAQ: PNNT) and TPG Specialty Lending (NYSE:TSLX) are both small-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their valuation, profitability, risk, analyst recommendations, institutional ownership, dividends and earnings.
This is a breakdown of recent ratings and recommmendations for PennantPark Investment and TPG Specialty Lending, as provided by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|TPG Specialty Lending||0||1||5||0||2.83|
PennantPark Investment presently has a consensus target price of $8.30, indicating a potential upside of 16.90%. TPG Specialty Lending has a consensus target price of $20.60, indicating a potential upside of 15.54%. Given PennantPark Investment’s higher probable upside, research analysts plainly believe PennantPark Investment is more favorable than TPG Specialty Lending.
Risk and Volatility
PennantPark Investment has a beta of 1.15, indicating that its share price is 15% more volatile than the S&P 500. Comparatively, TPG Specialty Lending has a beta of 0.61, indicating that its share price is 39% less volatile than the S&P 500.
PennantPark Investment pays an annual dividend of $0.72 per share and has a dividend yield of 10.1%. TPG Specialty Lending pays an annual dividend of $1.56 per share and has a dividend yield of 8.7%. PennantPark Investment pays out 91.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. TPG Specialty Lending pays out 78.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.
Institutional & Insider Ownership
44.9% of PennantPark Investment shares are owned by institutional investors. Comparatively, 61.9% of TPG Specialty Lending shares are owned by institutional investors. 2.0% of PennantPark Investment shares are owned by company insiders. Comparatively, 4.8% of TPG Specialty Lending shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.
Valuation and Earnings
This table compares PennantPark Investment and TPG Specialty Lending’s gross revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|PennantPark Investment||$124.53 million||4.05||$61.71 million||$0.79||8.99|
|TPG Specialty Lending||$210.90 million||5.49||$120.25 million||$2.00||8.92|
TPG Specialty Lending has higher revenue and earnings than PennantPark Investment. TPG Specialty Lending is trading at a lower price-to-earnings ratio than PennantPark Investment, indicating that it is currently the more affordable of the two stocks.
This table compares PennantPark Investment and TPG Specialty Lending’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|TPG Specialty Lending||54.68%||12.45%||7.21%|
TPG Specialty Lending beats PennantPark Investment on 12 of the 16 factors compared between the two stocks.
PennantPark Investment Company Profile
PennantPark Investment Corporation is a closed-end, non-diversified investment company. The Company is a business development company. Its objectives are to generate both current income and capital appreciation while seeking to preserve capital through debt and equity investments primarily made to the United States middle-market companies in the form of senior secured debt, mezzanine debt and equity investments. The Company’s debt investments may generally range in maturity from 3 to 10 years and, are made to the United States and to a limited extent, non-United States corporations, partnerships and other business entities, which operate in various industries and geographical regions. In addition, it may invest up to approximately 30% of its portfolio in non-qualifying assets. It invests in sectors, such as aerospace and defense; energy/utilities; auto sector; environmental services, and beverage, among others. PennantPark Investment Advisers, LLC is the Company’s investment advisor.
TPG Specialty Lending Company Profile
TPG Specialty Lending, Inc. is a business development company. The fund provides senior secured loans (first-lien, second-lien, and unitranche), mezzanine debt, non-control structured equity, and common equity with a focus on co-investments for organic growth, acquisitions, market or product expansion, restructuring initiatives, recapitalizations, and refinancing. The fund invests in business services, software & technology, healthcare, energy, consumer & retail, manufacturing, industrials, royalty related businesses, education, and specialty finance. It seeks to finance middle market companies principally located in the United States. The fund invests in companies with enterprise value between $50 million and $1 billion or more and EBITDA between $10 million and $250 million. The transaction size is between $15 million and $350 million. The fund invests across the spectrum of the capital structure and can arrange syndicated transactions of up to $500 million and hold sizeable positions within its credits.
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