Critical Review: Chicago Atlantic BDC (NASDAQ:LIEN) versus WhiteHorse Finance (NASDAQ:WHF)

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

Risk & Volatility

Chicago Atlantic BDC has a beta of 0.26, suggesting that its share price is 74% less volatile than the S&P 500. Comparatively, WhiteHorse Finance has a beta of 0.56, suggesting that its share price is 44% less volatile than the S&P 500.

Insider & Institutional Ownership

4.4% of Chicago Atlantic BDC shares are owned by institutional investors. Comparatively, 13.2% of WhiteHorse Finance shares are owned by institutional investors. 16.9% of Chicago Atlantic BDC shares are owned by insiders. Comparatively, 2.5% of WhiteHorse Finance shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Earnings & Valuation

This table compares Chicago Atlantic BDC and WhiteHorse Finance”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Chicago Atlantic BDC	$21.67 million	10.97	$9.62 million	$0.79	13.19
WhiteHorse Finance	$15.86 million	10.14	$10.85 million	$0.43	16.09

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

Profitability

This table compares Chicago Atlantic BDC and WhiteHorse Finance’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%
WhiteHorse Finance	12.91%	9.93%	4.14%

Analyst Ratings

This is a breakdown of current recommendations and price targets for Chicago Atlantic BDC and WhiteHorse Finance, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Chicago Atlantic BDC	0	3	0	0	2.00
WhiteHorse Finance	2	3	0	0	1.60

WhiteHorse Finance has a consensus target price of $7.75, indicating a potential upside of 11.99%. Given WhiteHorse Finance’s higher possible upside, analysts clearly believe WhiteHorse Finance is more favorable than Chicago Atlantic BDC.

Dividends

Chicago Atlantic BDC pays an annual dividend of $1.36 per share and has a dividend yield of 13.1%. WhiteHorse Finance pays an annual dividend of $1.00 per share and has a dividend yield of 14.5%. 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. WhiteHorse Finance pays out 232.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. WhiteHorse Finance has raised its dividend for 3 consecutive years. WhiteHorse Finance is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

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 WhiteHorse Finance

WhiteHorse Finance, Inc. is business development company, non-diversified, closed end management company specializing in originating senior secured loans, lower middle market, growth capital industries. It invests in broadline retail, office services and supplies, building products, health care services, health care supplies, research and consulting services, application software, home furnishings, specialized consumer services, data processing and outsourced services, leisure facilities, cable, and satellite. It prefers to invest in United States. It typically invests between $5 million to $25 million in companies having enterprise value of between $50 million and $350 million.