Ridgepost Capital (NYSE:RPC) and Sixth Street Specialty Lending (NYSE:TSLX) Critical Analysis

Ridgepost Capital (NYSE:RPC) and Sixth Street Specialty Lending (NYSE:TSLX) are both small-cap finance companies, but which is the better business? We will contrast the two businesses based on the strength of their profitability, dividends, institutional ownership, earnings, valuation, risk and analyst recommendations.

Risk and Volatility

Ridgepost Capital has a beta of 0.89, meaning that its stock price is 11% less volatile than the S&P 500. Comparatively, Sixth Street Specialty Lending has a beta of 0.62, meaning that its stock price is 38% less volatile than the S&P 500.

Profitability

This table compares Ridgepost Capital and Sixth Street Specialty Lending’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Ridgepost Capital	9.03%	21.02%	9.21%
Sixth Street Specialty Lending	21.79%	11.33%	5.16%

Valuation and Earnings

This table compares Ridgepost Capital and Sixth Street Specialty Lending”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Ridgepost Capital	$297.35 million	3.17	$19.50 million	$0.25	34.22
Sixth Street Specialty Lending	$132.14 million	12.10	$209.99 million	$0.95	17.71

Sixth Street Specialty Lending has lower revenue, but higher earnings than Ridgepost Capital. Sixth Street Specialty Lending is trading at a lower price-to-earnings ratio than Ridgepost Capital, indicating that it is currently the more affordable of the two stocks.

Insider & Institutional Ownership

48.0% of Ridgepost Capital shares are owned by institutional investors. Comparatively, 70.3% of Sixth Street Specialty Lending shares are owned by institutional investors. 11.8% of Ridgepost Capital shares are owned by insiders. Comparatively, 3.8% of Sixth Street Specialty Lending shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

Dividends

Ridgepost Capital pays an annual dividend of $0.16 per share and has a dividend yield of 1.9%. Sixth Street Specialty Lending pays an annual dividend of $1.68 per share and has a dividend yield of 10.0%. Ridgepost Capital pays out 64.0% of its earnings in the form of a dividend. Sixth Street Specialty Lending pays out 176.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Analyst Recommendations

This is a breakdown of current ratings and target prices for Ridgepost Capital and Sixth Street Specialty Lending, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Ridgepost Capital	0	2	2	0	2.50
Sixth Street Specialty Lending	0	3	5	0	2.62

Ridgepost Capital currently has a consensus target price of $13.00, indicating a potential upside of 51.96%. Sixth Street Specialty Lending has a consensus target price of $19.83, indicating a potential upside of 17.88%. Given Ridgepost Capital’s higher possible upside, equities research analysts plainly believe Ridgepost Capital is more favorable than Sixth Street Specialty Lending.

Summary

Sixth Street Specialty Lending beats Ridgepost Capital on 9 of the 16 factors compared between the two stocks.

About Ridgepost Capital

P10, Inc., together with its subsidiaries, operates as a multi-asset class private market solutions provider in the alternative asset management industry in the United States. The company offers private equity, venture capital, private credit, impact investing, and private credit services, as well as primary fund of funds, secondary investment, and direct and co-investments services. It also provides tax credit transaction and consulting services. The company was founded in 1992 and is headquartered in Dallas, Texas.

About Sixth Street Specialty Lending

Sixth Street Specialty Lending, Inc. (NYSE: TSLX) is a business development company. The fund provides senior secured loans (first-lien, second-lien, and unitranche), unsecured loans, mezzanine debt, and investments in corporate bonds and equity securities and structured products, non-control structured equity, and common equity with a focus on co-investments for organic growth, acquisitions, market or product expansion, restructuring initiatives, recapitalizations, and refinancing. The fund invests in business services, software & technology, healthcare, energy, consumer & retail, manufacturing, industrials, royalty related businesses, education, and specialty finance. It seeks to finance and lending to middle market companies principally located in the United States. The fund invests in companies with enterprise value between $50 million and $1 billion or more and EBITDA between $10 million and $250 million. The transaction size is between $15 million and $350 million. The fund invests across the spectrum of the capital structure and can arrange syndicated transactions of up to $500 million and hold sizeable positions within its credits.