FS KKR Capital (NYSE:FSK) & Bain Capital Specialty Finance (NYSE:BCSF) Critical Contrast

FS KKR Capital (NYSE:FSK) and Bain Capital Specialty Finance (NYSE:BCSF) are both finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their institutional ownership, valuation, analyst recommendations, dividends, earnings, risk and profitability.

Volatility and Risk

FS KKR Capital has a beta of 0.85, indicating that its share price is 15% less volatile than the S&P 500. Comparatively, Bain Capital Specialty Finance has a beta of 0.59, indicating that its share price is 41% less volatile than the S&P 500.

Insider & Institutional Ownership

36.3% of FS KKR Capital shares are owned by institutional investors. 0.2% of FS KKR Capital shares are owned by company insiders. Comparatively, 0.6% of Bain Capital Specialty Finance shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Profitability

This table compares FS KKR Capital and Bain Capital Specialty Finance’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
FS KKR Capital	-38.65%	4.34%	1.85%
Bain Capital Specialty Finance	27.00%	10.44%	4.35%

Dividends

FS KKR Capital pays an annual dividend of $1.80 per share and has a dividend yield of 16.4%. Bain Capital Specialty Finance pays an annual dividend of $1.68 per share and has a dividend yield of 12.6%. FS KKR Capital pays out -91.4% of its earnings in the form of a dividend. Bain Capital Specialty Finance pays out 147.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Bain Capital Specialty Finance has increased its dividend for 4 consecutive years. FS KKR Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Earnings & Valuation

This table compares FS KKR Capital and Bain Capital Specialty Finance”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
FS KKR Capital	$1.52 billion	2.02	$11.00 million	($1.97)	-5.56
Bain Capital Specialty Finance	$273.24 million	3.16	$98.76 million	$1.14	11.67

Bain Capital Specialty Finance has lower revenue, but higher earnings than FS KKR Capital. FS KKR Capital is trading at a lower price-to-earnings ratio than Bain Capital Specialty Finance, indicating that it is currently the more affordable of the two stocks.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for FS KKR Capital and Bain Capital Specialty Finance, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
FS KKR Capital	1	7	0	0	1.88
Bain Capital Specialty Finance	0	2	1	0	2.33

FS KKR Capital currently has a consensus target price of $10.58, suggesting a potential downside of 3.39%. Bain Capital Specialty Finance has a consensus target price of $14.00, suggesting a potential upside of 5.25%. Given Bain Capital Specialty Finance’s stronger consensus rating and higher probable upside, analysts plainly believe Bain Capital Specialty Finance is more favorable than FS KKR Capital.

Summary

Bain Capital Specialty Finance beats FS KKR Capital on 12 of the 17 factors compared between the two stocks.

About FS KKR Capital

FS KKR Capital Corp. is a business development company specializing in investments in debt securities. It provides customized credit solutions to private middle market U.S. companies. It invest primarily in the senior secured debt and, to a lesser extent, the subordinated debt of private middle market U.S. companies. It seeks to purchase interests in loans through secondary market transactions or directly from the target companies as primary market investments. It also seeks to invest in first lien senior secured loans, second lien secured loans and, to a lesser extent, subordinated loans, or mezzanine loans. In connection with the debt investments, the firm also receives equity interests such as warrants or options as additional consideration. It also seek to purchase minority interests in the form of common or preferred equity in our target companies, either in conjunction with one of the debt investments or through a co-investment with a financial sponsor. Additionally, on an opportunistic basis, the fund may also invest in corporate bonds and similar debt securities. The fund does not seek to invest in start-up companies, turnaround situations, or companies with speculative business plans. It seeks to invest in small and middle-market companies based in United States. The fund seeks to invest in firms with annual revenue between $10 million to $2.5 billion. It focus on providing customized one-stop credit solutions to private upper middle market companies with annual EBITDA of $50 million to $100 million at the time of investment. It seeks to exit from securities by selling them in a privately negotiated over- the- counter market. For any investments that are not able to be sold within the secondary market, the firm seeks to exit such investments through repayment, an initial public offering of equity securities, merger, sale or recapitalization.

About Bain Capital Specialty Finance

Bain Capital Specialty Finance, Inc. is business development company specializing in direct loans to middle-market companies. The fund seeks to invest in senior investments with a first or second lien on collateral, senior first lien, stretch senior, senior second lien, unitranche, mezzanine debt, junior securities, other junior investments, and secondary purchases of assets or portfolios that primarily consist of middle-market corporate debt. It typically invests in companies with EBITDA between $10 million and $150 million.