Financial Contrast: AFC Gamma (NASDAQ:AFCG) and MSC Income Fund (NYSE:MSIF)

MSC Income Fund (NYSE:MSIF) and AFC Gamma (NASDAQ:AFCG) are both small-cap finance companies, but which is the better stock? We will compare the two companies based on the strength of their dividends, valuation, analyst recommendations, profitability, risk, earnings and institutional ownership.

Profitability

This table compares MSC Income Fund and AFC Gamma’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
MSC Income Fund	N/A	N/A	N/A
AFC Gamma	71.50%	4.57%	2.31%

Analyst Recommendations

This is a breakdown of recent recommendations for MSC Income Fund and AFC Gamma, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
MSC Income Fund	0	3	4	0	2.57
AFC Gamma	1	1	0	0	1.50

MSC Income Fund currently has a consensus price target of $14.30, indicating a potential upside of 14.08%. Given MSC Income Fund’s stronger consensus rating and higher possible upside, equities analysts plainly believe MSC Income Fund is more favorable than AFC Gamma.

Dividends

MSC Income Fund pays an annual dividend of $1.32 per share and has a dividend yield of 10.5%. AFC Gamma pays an annual dividend of $0.20 per share and has a dividend yield of 5.7%. MSC Income Fund pays out 66.7% of its earnings in the form of a dividend. AFC Gamma pays out 19.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years.

Insider and Institutional Ownership

26.5% of AFC Gamma shares are held by institutional investors. 0.5% of MSC Income Fund shares are held by insiders. Comparatively, 30.7% of AFC Gamma shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Valuation & Earnings

This table compares MSC Income Fund and AFC Gamma”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
MSC Income Fund	$102.09 million	5.54	$89.32 million	$1.98	6.33
AFC Gamma	$36.91 million	2.13	-$20.67 million	$1.04	3.37

MSC Income Fund has higher revenue and earnings than AFC Gamma. AFC Gamma is trading at a lower price-to-earnings ratio than MSC Income Fund, indicating that it is currently the more affordable of the two stocks.

Summary

MSC Income Fund beats AFC Gamma on 9 of the 15 factors compared between the two stocks.

About MSC Income Fund

MSC Income Fund is a business development company that provides financing to privately held U.S. businesses. It seeks to support companies’ growth and other business needs through a portfolio of debt and equity investments. The fund focuses on lower middle-market and middle-market companies, offering financing that may be used for acquisitions, recapitalizations, refinancing, and growth initiatives. Its investments include secured debt and, in some cases, equity interests. MSC Income Fund is externally managed by MSC Adviser I, LLC, an affiliate of Main Street Capital Corporation.

About AFC Gamma

AFC Gamma, Inc. is a specialty finance company focused primarily on providing institutional debt financing to businesses operating in the regulated cannabis industry. The company has historically targeted established cannabis operators and other participants in the industry that may have limited access to traditional bank financing. Its financing activities have included senior secured loans, mortgage-backed loans and other structured debt arrangements. Borrowers may use these funds to support the acquisition, development or expansion of cannabis cultivation, processing, manufacturing and retail facilities, as well as related working-capital and corporate needs.