Contrasting Main Street Capital (NYSE:MAIN) and Runway Growth Finance (NASDAQ:RWAY)

Runway Growth Finance (NASDAQ:RWAY) and Main Street Capital (NYSE:MAIN) are both finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their profitability, dividends, earnings, valuation, risk, analyst recommendations and institutional ownership.

Dividends

Runway Growth Finance pays an annual dividend of $1.32 per share and has a dividend yield of 14.8%. Main Street Capital pays an annual dividend of $3.06 per share and has a dividend yield of 5.0%. Runway Growth Finance pays out 89.8% 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 pays out 50.7% of its earnings in the form of a dividend. Main Street Capital has raised its dividend for 4 consecutive years.

Profitability

This table compares Runway Growth Finance and Main Street Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Runway Growth Finance	38.92%	11.94%	5.80%
Main Street Capital	95.59%	12.39%	6.77%

Earnings and Valuation

This table compares Runway Growth Finance and Main Street Capital”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Runway Growth Finance	$144.63 million	2.23	$73.61 million	$1.47	6.07
Main Street Capital	$541.03 million	10.06	$508.08 million	$6.03	10.08

Main Street Capital has higher revenue and earnings than Runway Growth Finance. Runway Growth Finance is trading at a lower price-to-earnings ratio than Main Street Capital, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Runway Growth Finance and Main Street Capital, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Runway Growth Finance	0	4	3	0	2.43
Main Street Capital	0	5	4	0	2.44

Runway Growth Finance presently has a consensus price target of $11.10, indicating a potential upside of 24.30%. Main Street Capital has a consensus price target of $62.43, indicating a potential upside of 2.71%. Given Runway Growth Finance’s higher possible upside, equities research analysts clearly believe Runway Growth Finance is more favorable than Main Street Capital.

Risk and Volatility

Runway Growth Finance has a beta of 0.67, meaning that its share price is 33% less volatile than the S&P 500. Comparatively, Main Street Capital has a beta of 0.8, meaning that its share price is 20% less volatile than the S&P 500.

Institutional & Insider Ownership

64.6% of Runway Growth Finance shares are owned by institutional investors. Comparatively, 20.3% of Main Street Capital shares are owned by institutional investors. 1.0% of Runway Growth Finance shares are owned by company insiders. Comparatively, 4.1% of Main Street Capital shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.

Summary

Main Street Capital beats Runway Growth Finance on 14 of the 17 factors compared between the two stocks.

About Runway Growth Finance

Runway Growth Finance Corp. is a business development company specializing investments in senior-secured loans to late stage and growth companies. It prefers to make investments in companies engaged in the technology, life sciences, healthcare and information services, business services and select consumer services and products sectors. It prefers to investments in companies engaged in electronic equipment and instruments, systems software, hardware, storage and peripherals and specialized consumer services, application software, healthcare technology, internet software and services, data processing and outsourced services, internet retail, human resources and employment services, biotechnology, healthcare equipment and education services. It invests in senior secured loans between $10 million and $75 million.

About Main Street Capital

Main Street Capital Corporation is a business development company specializes in equity capital to lower middle market companies. The firm specializing in recapitalizations, management buyouts, refinancing, family estate planning, management buyouts, refinancing, industry consolidation, mature, later stage emerging growth. The firm also provides debt capital to middle market companies for acquisitions, management buyouts, growth financings, recapitalizations, and refinancing. The firm seeks to partner with entrepreneurs, business owners and management teams and generally provides “one stop” financing alternatives within its lower middle market portfolio. It prefers to invest in air freight and logistics, auto components, building products, chemicals, commercial services, computers, construction and engineering, consumer finance, consumer services, electronic equipment, energy equipment and services, financial services, health care equipment, health care providers, hotels, restaurants, and leisure, internet software and services, IT Services, machinery, oil, gas and consumable fuels, paper and forest products, professional and industrial services, road and rail, software, specialty retail, telecommunication, consumer discretionary, energy, materials, technology, and transportation. The firm typically invests in lower middle market companies generally with annual revenues between $10 million and $150 million. It prefers to invest in ranging between $5 million and $100 million in equity investment and enterprise value in ranging between $3 million and $20 million. The firm typically prefers to invest in the range of $5 million and $150 million per transaction in debt investment value and in the range of $3 million and $75 million in annual EBITDA in between $3 million and $25 million in lower middle market $5 million and $75 million in credit solution. The firm’s middle market debt investments are made in businesses that are generally larger in size than its lower middle market portfolio companies. It takes 5 percent minority and up to 50 percent majority equity investments. Main Street Capital Corporation was founded in 2007 and is based in Houston, Texas with an additional office in Chojnów, Poland.