Contrasting FS KKR Capital (NYSE:FSK) & Saratoga Investment (NYSE:SAR)

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

Insider & Institutional Ownership

36.3% of FS KKR Capital shares are owned by institutional investors. Comparatively, 19.1% of Saratoga Investment shares are owned by institutional investors. 0.2% of FS KKR Capital shares are owned by company insiders. Comparatively, 10.0% of Saratoga Investment shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Dividends

FS KKR Capital pays an annual dividend of $2.56 per share and has a dividend yield of 14.2%. Saratoga Investment pays an annual dividend of $3.00 per share and has a dividend yield of 11.8%. FS KKR Capital pays out 328.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Saratoga Investment pays out 121.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Volatility & Risk

FS KKR Capital has a beta of 0.93, suggesting that its share price is 7% less volatile than the S&P 500. Comparatively, Saratoga Investment has a beta of 0.64, suggesting that its share price is 36% less volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings and target prices for FS KKR Capital and Saratoga Investment, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
FS KKR Capital	2	5	0	0	1.71
Saratoga Investment	0	4	0	0	2.00

FS KKR Capital presently has a consensus price target of $18.42, indicating a potential upside of 2.29%. Saratoga Investment has a consensus price target of $24.25, indicating a potential downside of 4.96%. Given FS KKR Capital’s higher probable upside, equities analysts clearly believe FS KKR Capital is more favorable than Saratoga Investment.

Profitability

This table compares FS KKR Capital and Saratoga Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
FS KKR Capital	13.24%	6.24%	2.75%
Saratoga Investment	24.85%	12.71%	4.04%

Earnings & Valuation

This table compares FS KKR Capital and Saratoga Investment”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
FS KKR Capital	$1.72 billion	N/A	$585.00 million	$0.78	23.08
Saratoga Investment	$148.85 million	2.73	$28.09 million	$2.47	10.33

FS KKR Capital has higher revenue and earnings than Saratoga Investment. Saratoga Investment is trading at a lower price-to-earnings ratio than FS KKR Capital, indicating that it is currently the more affordable of 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 Saratoga Investment

Saratoga Investment Corp. is a business development company specializing in leveraged and management buyouts, acquisition financings, growth financings, recapitalization, debt refinancing, and transitional financing transactions at the lower end of middle market companies. It structures its investments as debt and equity by investing through first and second lien loans, mezzanine debt, co-investments, select high yield bonds, senior secured bonds, unsecured bonds, and preferred and common equity. The firm prefers to invest in aerospace, automotive aftermarket and services, business products and services, consumer products and services, education, environmental services, industrial services, financial services, food and beverage, healthcare products and services, logistics, distribution, manufacturing, restaurants services, food services, software services, technology services, specialty chemical, media and telecommunications. It seeks to invest in the United States. The firm primarily invests $5 million to $50 million in companies having EBITDA of $2 million or greater and revenues of $8 million to $250 million. The firm prefer to take a majority stake. It invests through direct lending as well as participation in loan syndicates. The firm was formerly known as GSC Investment Corp. Saratoga Investment Corp. was formed on 2007 and is based in New York, New York with an additional office in Florham Park, New Jersey.