Analyzing MidCap Financial Investment (NASDAQ:MFIC) & Canaan (NASDAQ:CAN)

MidCap Financial Investment (NASDAQ:MFIC) and Canaan (NASDAQ:CAN) are both small-cap finance companies, but which is the superior business? We will compare the two businesses based on the strength of their dividends, earnings, profitability, valuation, risk, analyst recommendations and institutional ownership.

Valuation and Earnings

This table compares MidCap Financial Investment and Canaan”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
MidCap Financial Investment	$78.04 million	14.11	$63.17 million	$0.66	18.09
Canaan	$529.73 million	0.70	-$210.27 million	($0.48)	-1.08

MidCap Financial Investment has higher earnings, but lower revenue than Canaan. Canaan is trading at a lower price-to-earnings ratio than MidCap Financial Investment, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares MidCap Financial Investment and Canaan’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
MidCap Financial Investment	19.69%	10.43%	4.22%
Canaan	-39.69%	-60.70%	-34.60%

Insider & Institutional Ownership

28.5% of MidCap Financial Investment shares are held by institutional investors. Comparatively, 70.1% of Canaan shares are held by institutional investors. 0.8% of MidCap Financial Investment shares are held by company insiders. Comparatively, 0.3% of Canaan shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of recent ratings and recommmendations for MidCap Financial Investment and Canaan, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
MidCap Financial Investment	0	7	2	0	2.22
Canaan	1	2	6	0	2.56

MidCap Financial Investment currently has a consensus price target of $11.54, indicating a potential downside of 3.39%. Canaan has a consensus price target of $2.17, indicating a potential upside of 318.60%. Given Canaan’s stronger consensus rating and higher possible upside, analysts plainly believe Canaan is more favorable than MidCap Financial Investment.

Volatility and Risk

MidCap Financial Investment has a beta of 0.63, indicating that its stock price is 37% less volatile than the S&P 500. Comparatively, Canaan has a beta of 2.65, indicating that its stock price is 165% more volatile than the S&P 500.

Summary

MidCap Financial Investment beats Canaan on 8 of the 14 factors compared between the two stocks.

About MidCap Financial Investment

MidCap Financial Investment Corporation (Former name Apollo Investment Corporation) is business development company and a closed-end, externally managed, non-diversified management investment company. It is elected to be treated as a business development company (BDC) under the Investment Company Act of 1940 (the 1940 Act) specializing in private equity investments in leveraged buyouts, acquisitions, recapitalizations, growth capital, refinancing and private middle market companies. It provides direct equity capital, mezzanine, first lien secured loans, stretch senior loans, unitranche loans, second lien secured loans and senior secured loans, unsecured debt, and subordinated debt and loans. It also seeks to invest in PIPES transactions. The fund may also invest in securities of public companies that are thinly traded and may acquire investments in the secondary market and structured products. It prefers to invest in preferred equity, common equity / interests and warrants and makes equity co-investments. It may invest in cash equivalents, U.S. government securities, high-quality debt investments that mature in one year or less, high-yield bonds, distressed debt, non-U.S. investments, or securities of public companies that are not thinly traded. It also focuses on other investments such as collateralized loan obligations (CLOs) and credit-linked notes (CLNs). The fund typically invests in construction and building materials, business services, plastics & rubber, advertising, capital equipment, education, cable television, chemicals, consumer products/goods durable and non-durable and customer services, direct marketing, energy oil & gas, electricity and utilities. The fund also invest in aerospace & defense, wholesale, telecommunications, financial services, hotel, gaming, leisure, restaurants; environmental industries, healthcare and pharmaceuticals, high tech industries, beverages, food and tobacco, manufacturing, media diversified & production, printing and publishing, retail, automation, aviation and consumer transport, transportation, cargo and distribution. It primarily invests in United States. It primarily invests between $20 million and $250 million in its portfolio companies and EBITDA with less than $75 million. The fund seeks to make investments with stated maturities of five to 10 years.

About Canaan

Canaan Inc. engages in the research, design, and sale of integrated circuit (IC) final mining equipment products by integrating IC products for bitcoin mining and related components in the People's Republic of China. It is also involved in the assembly and distribution of mining equipment and spare parts. The company has operations in the United States, Australia, Kazakhstan, Hong Kong, Canada, Mainland China, Thailand, Sweden, and internationally. Canaan Inc. was founded in 2013 and is based in Singapore.