Financial Review: Stellus Capital Investment (NYSE:SCM) versus BlackRock (NYSE:BLK)

Stellus Capital Investment (NYSE:SCM) and BlackRock (NYSE:BLK) are both 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

Stellus Capital Investment has a beta of 0.71, suggesting that its share price is 29% less volatile than the S&P 500. Comparatively, BlackRock has a beta of 1.41, suggesting that its share price is 41% more volatile than the S&P 500.

Profitability

This table compares Stellus Capital Investment and BlackRock’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Stellus Capital Investment	30.66%	9.09%	3.32%
BlackRock	24.22%	16.08%	5.32%

Insider & Institutional Ownership

13.2% of Stellus Capital Investment shares are owned by institutional investors. Comparatively, 80.7% of BlackRock shares are owned by institutional investors. 4.2% of Stellus Capital Investment shares are owned by insiders. Comparatively, 1.9% of BlackRock 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.

Dividends

Stellus Capital Investment pays an annual dividend of $1.00 per share and has a dividend yield of 15.0%. BlackRock pays an annual dividend of $22.92 per share and has a dividend yield of 2.1%. Stellus Capital Investment pays out 98.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. BlackRock pays out 52.1% of its earnings in the form of a dividend. BlackRock has raised its dividend for 16 consecutive years.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Stellus Capital Investment and BlackRock, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Stellus Capital Investment	1	2	1	0	2.00
BlackRock	0	2	15	1	2.94

Stellus Capital Investment presently has a consensus target price of $9.25, indicating a potential upside of 39.01%. BlackRock has a consensus target price of $1,337.19, indicating a potential upside of 19.70%. Given Stellus Capital Investment’s higher possible upside, analysts clearly believe Stellus Capital Investment is more favorable than BlackRock.

Valuation & Earnings

This table compares Stellus Capital Investment and BlackRock”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Stellus Capital Investment	$102.14 million	1.86	$27.05 million	$1.02	6.52
BlackRock	$28.54 billion	6.06	$5.55 billion	$43.98	25.40

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

Summary

BlackRock beats Stellus Capital Investment on 14 of the 18 factors compared between the two stocks.

About Stellus Capital Investment

Stellus Capital Investment Corporation is a business development company specializing in investments in private middle-market companies. It invests through first lien, second lien, unitranche, and mezzanine debt financing, often with a corresponding equity investment. The fund prefers to invest in US and Canada. The fund seeks to invest in companies with an EBITDA between $5 million and $50 million.

About BlackRock

BlackRock, Inc. is a publicly owned investment manager. The firm primarily provides its services to institutional, intermediary, and individual investors including corporate, public, union, and industry pension plans, insurance companies, third-party mutual funds, endowments, public institutions, governments, foundations, charities, sovereign wealth funds, corporations, official institutions, and banks. It also provides global risk management and advisory services. The firm manages separate client-focused equity, fixed income, and balanced portfolios. It also launches and manages open-end and closed-end mutual funds, offshore funds, unit trusts, and alternative investment vehicles including structured funds. The firm launches equity, fixed income, balanced, and real estate mutual funds. It also launches equity, fixed income, balanced, currency, commodity, and multi-asset exchange traded funds. The firm also launches and manages hedge funds. It invests in the public equity, fixed income, real estate, currency, commodity, and alternative markets across the globe. The firm primarily invests in growth and value stocks of small-cap, mid-cap, SMID-cap, large-cap, and multi-cap companies. It also invests in dividend-paying equity securities. The firm invests in investment grade municipal securities, government securities including securities issued or guaranteed by a government or a government agency or instrumentality, corporate bonds, and asset-backed and mortgage-backed securities. It employs fundamental and quantitative analysis with a focus on bottom-up and top-down approach to make its investments. The firm employs liquidity, asset allocation, balanced, real estate, and alternative strategies to make its investments. In real estate sector, it seeks to invest in Poland and Germany. The firm benchmarks the performance of its portfolios against various S&P, Russell, Barclays, MSCI, Citigroup, and Merrill Lynch indices. BlackRock, Inc. was founded in 1988 and is based in New York City with additional offices in Boston, Massachusetts; London, United Kingdom; Gurgaon, India; Hong Kong; Greenwich, Connecticut; Princeton, New Jersey; Edinburgh, United Kingdom; Sydney, Australia; Taipei, Taiwan; Singapore; Sao Paulo, Brazil; Philadelphia, Pennsylvania; Washington, District of Columbia; Toronto, Canada; Wilmington, Delaware; and San Francisco, California.