Main Street Capital (MAIN) vs. The ONE Group (STKS) Critical Analysis

Main Street Capital (NYSE: MAIN) and The ONE Group (NASDAQ:STKS) are both finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their analyst recommendations, institutional ownership, risk, valuation, profitability, dividends and earnings.

Risk and Volatility

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Main Street Capital has a beta of 0.93, meaning that its share price is 7% less volatile than the S&P 500. Comparatively, The ONE Group has a beta of 0.61, meaning that its share price is 39% less volatile than the S&P 500.

Institutional & Insider Ownership

27.6% of Main Street Capital shares are held by institutional investors. Comparatively, 8.6% of The ONE Group shares are held by institutional investors. 5.3% of Main Street Capital shares are held by insiders. Comparatively, 35.9% of The ONE Group shares are held 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

Main Street Capital pays an annual dividend of $2.28 per share and has a dividend yield of 6.1%. The ONE Group does not pay a dividend. Main Street Capital pays out 95.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Main Street Capital has increased its dividend for 7 consecutive years.

Analyst Recommendations

This is a summary of recent recommendations and price targets for Main Street Capital and The ONE Group, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Main Street Capital 1 3 2 0 2.17
The ONE Group 0 0 0 0 N/A

Main Street Capital presently has a consensus price target of $38.25, indicating a potential upside of 2.55%. Given Main Street Capital’s higher possible upside, research analysts clearly believe Main Street Capital is more favorable than The ONE Group.

Profitability

This table compares Main Street Capital and The ONE Group’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Main Street Capital 82.93% 10.34% 6.17%
The ONE Group -5.26% -42.13% -4.18%

Valuation & Earnings

This table compares Main Street Capital and The ONE Group’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Main Street Capital $205.74 million 10.65 $170.62 million $2.39 15.61
The ONE Group $79.80 million 0.83 -$4.20 million N/A N/A

Main Street Capital has higher revenue and earnings than The ONE Group.

Summary

Main Street Capital beats The ONE Group on 12 of the 14 factors compared between the two stocks.

Main Street Capital Company Profile

Main Street Capital Corporation is a business development company specializing in long- term equity and debt investments in small and lower middle market companies. The firm focuses on investments in, subordinated loans, private equity, venture debt, mezzanine investments, mature, mid venture, industry consolidation, later stage, late venture, emerging growth, management buyouts, change of control transactions, ownership transitions, recapitalizations, strategic acquisitions, refinancing, business expansion capital, growth financings, family estate planning, and other growth initiatives primarily for later stage businesses. It invests in consumer discretionary, consumer staples, energy, healthcare, industrials, information technology, materials, telecommunication services, and utilities sectors. It does not seek to invest in start-up companies or companies with speculative business plans. It seeks to invest in traditional or basic businesses. The firm primarily invests in companies based in the Southern, South Central, and Southwestern regions of the United States but also considers other domestic investment opportunities. It typically invests between $2 million and $75 million in equity and $5 million to $50 million in debt, revenue between $10 million and $150 million, enterprise value between $3 million and $50 million, and EBITDA between $1 million and $20 million. The firm seeks to charge a fixed interest rate between 12 percent and 14 percent, payable in cash, in case of its mezzanine loan investments. The firm typically invests in the form of term debt with equity participation and/or direct equity investments. It prefers to maintain fully diluted minority and majority equity positions in its portfolio companies of 5 percent to 50 percent, and may have controlling interests in some instances. The firm also co-invests with other investment firms. It seeks to exit its debt investments through the repayment of the investment from internally generated cash flow and/or refinancing within a period of three to seven years. It participates in warrants, PIK (Payment in Kind) interest, convertible securities, junior secured or unsecured, senior secured debt, unitranche debt, equity related, common equity, and preferred equity. Main Street Capital Corporation was incorporated on March 9, 2007 and is based at Houston, Texas.

The ONE Group Company Profile

The ONE Group Hospitality, Inc., a hospitality company, develops, owns, and operates restaurants and lounges worldwide. It operates in three segments: STK Units, Food and Beverage Hospitality Management Agreements, and Other Concepts. The company also provides turn-key food and beverage services for hospitality venues, including hotels, casinos, and other locations. Its hospitality food and beverage solutions include developing, managing, and operating restaurants, bars, rooftops, pools, banqueting, catering, private dining rooms, room service, and mini bars. The company operates restaurants primarily under the STK brand. As of April 5, 2017, it owned and operated 11 restaurants; managed 13 restaurants and lounges under management agreements; and licensed 1 restaurant in the United States and Europe. The company was founded in 2004 and is headquartered in New York, New York.

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