Comparing OFS Capital (NASDAQ:OFS) and Chicago Atlantic BDC (NASDAQ:LIEN)

Chicago Atlantic BDC (NASDAQ:LIEN) and OFS Capital (NASDAQ:OFS) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their analyst recommendations, valuation, institutional ownership, dividends, profitability, earnings and risk.

Profitability

This table compares Chicago Atlantic BDC and OFS Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Chicago Atlantic BDC	33.72%	5.80%	5.46%
OFS Capital	7.52%	8.95%	3.41%

Dividends

Chicago Atlantic BDC pays an annual dividend of $1.36 per share and has a dividend yield of 12.4%. OFS Capital pays an annual dividend of $1.36 per share and has a dividend yield of 26.5%. Chicago Atlantic BDC pays out 172.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. OFS Capital pays out 566.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. OFS Capital has raised its dividend for 3 consecutive years. OFS Capital is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Institutional and Insider Ownership

4.4% of Chicago Atlantic BDC shares are owned by institutional investors. Comparatively, 10.8% of OFS Capital shares are owned by institutional investors. 16.9% of Chicago Atlantic BDC shares are owned by company insiders. Comparatively, 0.5% of OFS Capital shares are owned 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.

Volatility & Risk

Chicago Atlantic BDC has a beta of 0.26, suggesting that its share price is 74% less volatile than the S&P 500. Comparatively, OFS Capital has a beta of 0.87, suggesting that its share price is 13% less volatile than the S&P 500.

Valuation and Earnings

This table compares Chicago Atlantic BDC and OFS Capital”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Chicago Atlantic BDC	$21.67 million	11.51	$9.62 million	$0.79	13.84
OFS Capital	$47.96 million	N/A	$28.44 million	$0.24	21.38

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

Analyst Ratings

This is a breakdown of current recommendations and price targets for Chicago Atlantic BDC and OFS Capital, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Chicago Atlantic BDC	0	3	0	0	2.00
OFS Capital	0	2	0	0	2.00

OFS Capital has a consensus target price of $7.00, indicating a potential upside of 36.45%. Given OFS Capital’s higher possible upside, analysts plainly believe OFS Capital is more favorable than Chicago Atlantic BDC.

Summary

OFS Capital beats Chicago Atlantic BDC on 9 of the 14 factors compared between the two stocks.

About Chicago Atlantic BDC

Chicago Atlantic BDC Inc. is a specialty finance company which has elected to be regulated as a business development company. Its investment objective is to maximize risk-adjusted returns on equity for its stockholders by investing primarily in direct loans to privately held middle-market companies, with a primary focus on cannabis companies. Chicago Atlantic BDC Inc., formerly known as CHICAGO ATLNTIC, is based in NEW YORK.

About OFS Capital

OFS Capital Corporation is a business development company specializing in direct and fund investments as well as add-on acquisitions. It provides flexible capital solutions primarily through debt capital and to a lesser extent, minority equity investments serving the needs of U.S.-based middle-market companies across a broad array of industries. 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, ownership transition, 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, construction & building, durable goods, capital equipment, automotive, food and beverage, healthcare & pharmaceutical, specialty chemicals, transportation cargo and logistics, value added distribution, franchising, and industrial and niche manufacturing sectors. The firm invests in companies based in United States. It seeks to invest between $3 million and $35 million, revenues between $15 million and $300 million, annual EBITDA between $5 million and $50 million, and Enterprise value between $10 million and $500 million. The firm seeks to invest in companies with debt investment values between $5 million and $25 million. The fund uses senior secured, unitranche loans, first-lien, second lien, subordinated/ mezzanine loans, warrants, and preferred equity securities and common equity securities. It prefers to take a minority as well as majority stake in the investments made. It also co-invests with its partners for additional capital.