Main Street Capital (NYSE:MAIN) & Kayne Anderson BDC (NYSE:KBDC) Critical Analysis

Kayne Anderson BDC (NYSE:KBDC) and Main Street Capital (NYSE:MAIN) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their earnings, valuation, institutional ownership, risk, profitability, dividends and analyst recommendations.

Volatility & Risk

Kayne Anderson BDC has a beta of 0.32, indicating that its stock price is 68% less volatile than the S&P 500. Comparatively, Main Street Capital has a beta of 0.72, indicating that its stock price is 28% less volatile than the S&P 500.

Insider and Institutional Ownership

20.3% of Main Street Capital shares are held by institutional investors. 2.9% of Kayne Anderson BDC shares are held by insiders. Comparatively, 3.8% of Main Street Capital shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Analyst Ratings

This is a breakdown of recent recommendations for Kayne Anderson BDC and Main Street Capital, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Kayne Anderson BDC	1	2	2	0	2.20
Main Street Capital	0	6	4	0	2.40

Kayne Anderson BDC currently has a consensus target price of $14.50, indicating a potential upside of 11.59%. Main Street Capital has a consensus target price of $60.83, indicating a potential upside of 7.78%. Given Kayne Anderson BDC’s higher possible upside, equities research analysts plainly believe Kayne Anderson BDC is more favorable than Main Street Capital.

Profitability

This table compares Kayne Anderson BDC and Main Street Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Kayne Anderson BDC	31.54%	10.63%	5.06%
Main Street Capital	78.49%	11.80%	6.32%

Dividends

Kayne Anderson BDC pays an annual dividend of $1.60 per share and has a dividend yield of 12.3%. Main Street Capital pays an annual dividend of $3.18 per share and has a dividend yield of 5.6%. Kayne Anderson BDC pays out 146.8% 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 64.1% of its earnings in the form of a dividend. Main Street Capital has increased its dividend for 4 consecutive years.

Valuation and Earnings

This table compares Kayne Anderson BDC and Main Street Capital”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Kayne Anderson BDC	$235.82 million	3.64	$93.71 million	$1.09	11.92
Main Street Capital	$566.39 million	9.32	$493.40 million	$4.96	11.38

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

Summary

Main Street Capital beats Kayne Anderson BDC on 14 of the 17 factors compared between the two stocks.

About Kayne Anderson BDC

Kayne Anderson BDC Inc. is a business development company which invests primarily in first lien senior secured loans, with a secondary focus on unitranche and split-lien loans to middle market companies. Kayne Anderson BDC Inc. is based in CHICAGO.

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.