Financial Survey: TCP Capital (TCPC) & Harvest Capital Credit (HCAP)

TCP Capital (NASDAQ: TCPC) and Harvest Capital Credit (NASDAQ:HCAP) are both small-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, profitability, risk, valuation, institutional ownership, analyst recommendations and earnings.

Analyst Ratings

This is a summary of current recommendations and price targets for TCP Capital and Harvest Capital Credit, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
TCP Capital 0 0 5 0 3.00
Harvest Capital Credit 0 2 0 0 2.00

TCP Capital currently has a consensus target price of $18.00, indicating a potential upside of 24.14%. Harvest Capital Credit has a consensus target price of $13.50, indicating a potential upside of 26.05%. Given Harvest Capital Credit’s higher possible upside, analysts plainly believe Harvest Capital Credit is more favorable than TCP Capital.

Dividends

TCP Capital pays an annual dividend of $1.44 per share and has a dividend yield of 9.9%. Harvest Capital Credit pays an annual dividend of $1.14 per share and has a dividend yield of 10.6%. TCP Capital pays out 102.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Harvest Capital Credit pays out 242.6% 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 TCP Capital and Harvest Capital Credit’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
TCP Capital $148.18 million 5.75 $95.36 million $1.41 10.28
Harvest Capital Credit $20.89 million 3.33 $6.00 million $0.47 22.79

TCP Capital has higher revenue and earnings than Harvest Capital Credit. TCP Capital is trading at a lower price-to-earnings ratio than Harvest Capital Credit, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares TCP Capital and Harvest Capital Credit’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
TCP Capital 49.53% 12.17% 6.82%
Harvest Capital Credit 14.76% 11.04% 6.80%

Risk & Volatility

TCP Capital has a beta of 0.68, suggesting that its stock price is 32% less volatile than the S&P 500. Comparatively, Harvest Capital Credit has a beta of 0.69, suggesting that its stock price is 31% less volatile than the S&P 500.

Insider & Institutional Ownership

53.5% of TCP Capital shares are held by institutional investors. Comparatively, 6.0% of Harvest Capital Credit shares are held by institutional investors. 0.6% of TCP Capital shares are held by company insiders. Comparatively, 9.5% of Harvest Capital Credit shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Summary

TCP Capital beats Harvest Capital Credit on 11 of the 16 factors compared between the two stocks.

About TCP Capital

TCP Capital Corp. is an externally managed, closed-end, non-diversified management investment company. The Company’s investment objective is to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection. It invests in the debt of middle-market companies, as well as small businesses, including senior secured loans, junior loans, mezzanine debt and bonds. Its investments may include an equity component and may make equity investments directly. It intends to focus on privately negotiated investments in debt of middle-market companies. It may make investments of all kinds and at all levels of the capital structure, including in equity interests, such as preferred or common stock and warrants or options received in connection with its debt investments. As of December 31, 2016, its investment portfolio consisted of 90 portfolio companies. Tennenbaum Capital Partners, LLC is the investment manager and advisor of the Company.

About Harvest Capital Credit

Harvest Capital Credit Corporation is an externally managed, closed-end, non-diversified management investment company. The Company operates as a business development company and provides customized financing solutions for small to mid-sized companies. Its investment objective is to generate both current income and capital appreciation by making direct investments in the form of subordinated debt, senior debt, and to a lesser extent, minority equity investments in privately-held the United States small to mid-sized companies. Its investment portfolio includes over 56.8% of senior secured term loans, 40.8% of junior secured term loans, 1.3% of equity investments and 1.1% of collateralized loan obligation (CLO) equity at fair value. It may also invest in other investments, such as loans to larger, publicly-traded companies, high-yield bonds and distressed debt securities. It may also invest in debt and equity securities issued by CLO funds. HCAP Advisors LLC is its investment adviser.

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