Analyzing Prospect Capital (NASDAQ:PSEC) & Apollo Global Management (NYSE:APO)

Apollo Global Management (NYSE:APO) and Prospect Capital (NASDAQ:PSEC) are both finance companies, but which is the superior investment? We will compare the two companies based on the strength of their risk, institutional ownership, dividends, analyst recommendations, valuation, profitability and earnings.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Apollo Global Management and Prospect Capital, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Apollo Global Management	0	3	13	1	2.88
Prospect Capital	2	0	0	0	1.00

Apollo Global Management currently has a consensus price target of $150.75, indicating a potential upside of 12.67%. Prospect Capital has a consensus price target of $2.00, indicating a potential downside of 8.88%. Given Apollo Global Management’s stronger consensus rating and higher probable upside, analysts clearly believe Apollo Global Management is more favorable than Prospect Capital.

Profitability

This table compares Apollo Global Management and Prospect Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Apollo Global Management	3.62%	14.43%	1.21%
Prospect Capital	-10.42%	12.03%	5.43%

Dividends

Apollo Global Management pays an annual dividend of $2.04 per share and has a dividend yield of 1.5%. Prospect Capital pays an annual dividend of $0.54 per share and has a dividend yield of 24.6%. Apollo Global Management pays out 129.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Prospect Capital pays out -145.9% of its earnings in the form of a dividend. Apollo Global Management has increased its dividend for 3 consecutive years. Prospect Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional & Insider Ownership

77.1% of Apollo Global Management shares are owned by institutional investors. Comparatively, 9.1% of Prospect Capital shares are owned by institutional investors. 8.3% of Apollo Global Management shares are owned by insiders. Comparatively, 0.0% of Prospect Capital shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Earnings & Valuation

This table compares Apollo Global Management and Prospect Capital”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Apollo Global Management	$32.05 billion	2.41	$3.49 billion	$1.57	85.22
Prospect Capital	$719.44 million	1.53	-$469.92 million	($0.37)	-5.93

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

Volatility & Risk

Apollo Global Management has a beta of 1.52, indicating that its stock price is 52% more volatile than the S&P 500. Comparatively, Prospect Capital has a beta of 0.82, indicating that its stock price is 18% less volatile than the S&P 500.

Summary

Apollo Global Management beats Prospect Capital on 15 of the 18 factors compared between the two stocks.

About Apollo Global Management

Apollo Global Management, Inc. is a private equity firm specializing in investments in credit, private equity, infrastructure, secondaries and real estate markets. The firm prefers to invest in private and public markets. The firm’s private equity investments include traditional buyouts, recapitalization, distressed buyouts and debt investments in real estate, corporate partner buyouts, distressed asset, corporate carve-outs, middle market, growth, venture capital, turnaround, bridge, corporate restructuring, special situation, acquisition, and industry consolidation transactions. For credit strategies, the firm focuses to invest in multi-sector credit, semi-liquid credit, direct lending, first lien, unitranche, whole loans and private credit. The firm provides its services to endowment and sovereign wealth funds, as well as other institutional and individual investors. It manages client focused portfolios. The firm launches and manages hedge funds for its clients. It also manages real estate funds and private equity funds for its clients. The firm invests in the fixed income and alternative investment markets across the globe. Its fixed income investments include income-oriented senior loans, bonds, collateralized loan obligations, structured credit, opportunistic credit, non-performing loans, distressed debt, mezzanine debt, and value oriented fixed income securities. The firm seeks to invest in chemicals, commodities, consumer and retail, oil and gas, metals, mining, agriculture, commodities, distribution and transportation, financial and business services, manufacturing and industrial, media distribution, cable, entertainment and leisure, telecom, technology, natural resources, energy, packaging and materials, and satellite and wireless industries. It also focuses on clean energy, sustainable industry, climate solutions, energy transition, industrial decarbonization, sustainable mobility, sustainable resource use, and sustainable real estate. It seeks to invest in companies based in across Africa, Asia, North America with a focus on United States, Western Europe and Europe. It employs a combination of contrarian, value, and distressed strategies to make its investments. The firm seeks to make investments in the range of $75 million and $1500 million. The firm seeks to invest in companies with Enterprise value between $750 million to $2500 million. The firm conducts in-house research to create its investment portfolio. It seeks to acquire minority and majority positions in its portfolio companies. Apollo Global Management, Inc. was founded in 1990 and is headquartered in New York, New York with additional offices in North America, Asia, Africa and Europe.

About Prospect Capital

Prospect Capital Corporation is a business development company. It specializes in middle market, mature, mezzanine finance, later stage, emerging growth, leveraged buyouts, refinancing, acquisitions, recapitalizations, turnaround, growth capital, development, capital expenditures and subordinated debt tranches of collateralized loan obligations, cash flow term loans, market place lending and bridge transactions. It also makes real estate investments particularly in multi-family residential real estate asset class. The fund makes secured debt, senior debt, senior and secured term loans, unitranche debt, first-lien and second lien, private debt, private equity, mezzanine debt, and equity investments in private and microcap public businesses. It focuses on both primary origination and secondary loans/portfolios and invests in situations like debt financings for private equity sponsors, acquisitions, dividend recapitalizations, growth financings, bridge loans, cash flow term loans, real estate financings/investments. It also focuses on investing in small-sized and medium-sized private companies rather than large public companies. The fund typically invests across all industry sectors, with a particular expertise in the energy and industrial sectors. It invests in aerospace and defense, chemicals, conglomerate services, consumer services, ecological, electronics, financial services, machinery, manufacturing, media, pharmaceuticals, retail, software, specialty minerals, textiles and leather, transportation, oil and gas production, coal production, materials, industrials, consumer discretionary, information technology, utilities, pipeline, storage, power generation and distribution, renewable and clean energy, oilfield services, healthcare, food and beverage, education, business services, and other select sectors. It prefers to invest in the United States and Canada. The fund seeks to invest between $10 million to $500 million per transaction in companies with EBITDA between $5 million and $150 million, sales value between $25 million and $500 million, and enterprise value between $5 million and $1000 million. It fund also co-invests for larger deals. The fund seeks control acquisitions by providing multiple levels of the capital structure. The fund focuses on sole, agented, club, or syndicated deals.