X Financial (NYSE:XYF) and Oaktree Specialty Lending (NASDAQ:OCSL) Critical Contrast

Oaktree Specialty Lending (NASDAQ:OCSL) and X Financial (NYSE:XYF) are both small-cap finance companies, but which is the better business? We will compare the two businesses based on the strength of their earnings, analyst recommendations, dividends, risk, valuation, profitability and institutional ownership.

Volatility and Risk

Oaktree Specialty Lending has a beta of 0.66, meaning that its share price is 34% less volatile than the S&P 500. Comparatively, X Financial has a beta of 0.12, meaning that its share price is 88% less volatile than the S&P 500.

Dividends

Oaktree Specialty Lending pays an annual dividend of $1.60 per share and has a dividend yield of 12.4%. X Financial pays an annual dividend of $0.48 per share and has a dividend yield of 3.4%. Oaktree Specialty Lending pays out 285.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. X Financial pays out 9.0% of its earnings in the form of a dividend.

Analyst Ratings

This is a summary of current ratings and recommmendations for Oaktree Specialty Lending and X Financial, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Oaktree Specialty Lending	1	8	0	0	1.89
X Financial	0	0	1	0	3.00

Oaktree Specialty Lending presently has a consensus price target of $15.00, indicating a potential upside of 15.92%. Given Oaktree Specialty Lending’s higher possible upside, research analysts plainly believe Oaktree Specialty Lending is more favorable than X Financial.

Profitability

This table compares Oaktree Specialty Lending and X Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Oaktree Specialty Lending	13.84%	10.94%	5.23%
X Financial	23.30%	25.42%	14.98%

Earnings & Valuation

This table compares Oaktree Specialty Lending and X Financial”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Oaktree Specialty Lending	$381.67 million	2.99	$57.90 million	$0.56	23.11
X Financial	$804.43 million	0.74	$210.97 million	$5.34	2.68

X Financial has higher revenue and earnings than Oaktree Specialty Lending. X Financial is trading at a lower price-to-earnings ratio than Oaktree Specialty Lending, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

36.8% of Oaktree Specialty Lending shares are held by institutional investors. Comparatively, 1.2% of X Financial shares are held by institutional investors. 0.3% of Oaktree Specialty Lending shares are held by company insiders. Comparatively, 31.6% of X Financial shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Summary

X Financial beats Oaktree Specialty Lending on 10 of the 16 factors compared between the two stocks.

About Oaktree Specialty Lending

Oaktree Specialty Lending Corporation is a business development company. The fund specializing in investments in middle market, bridge financing, first and second lien debt financing, unsecured and mezzanine loan, mezzanine debt, senior and junior secured debt, expansions, sponsor-led acquisitions, preferred equity, and management buyouts in small and mid-sized companies. It seeks to invest in education services, business services, retail and consumer, healthcare, manufacturing, food and restaurants, construction and engineering. The firm also seeks investment in media, advertising sectors, software, IT services, pharmaceuticals, biotechnology, real estate management and development, chemicals, machinery, and internet and direct marketing retail sectors. It invests between $5 million to $75 million principally in the form of one-stop, first lien, and second lien debt investments, which may include an equity co-investment component in companies. The firm invest in companies having enterprise value between $20 million and $150 million and EBITDA between $3 million and $50 million. The fund has a hold size of up to $75 million and may underwrite transactions up to $100 million. It primarily invests in North America. The fund seeks to be a lead investor in its portfolio companies.

About X Financial

X Financial provides personal finance services in the People’s Republic of China. The company offers services as an online marketplace connecting borrowers and investors or institutional funding partners. Its loan products include Xiaoying credit loan, which consists of Xiaoying card loan; and Xiaoying preferred loan to small business owners. The company also offers Xiaoying housing loan, a home equity loan product for property owners; investment products through Xiaoying wealth management platform, such as funds, money market, and insurance products; and loan facilitation services to other platforms. In addition, it engages in the technology development, service, and sale of products; and provision of guarantee and consulting services. The company was incorporated in 2014 and is headquartered in Shenzhen, the People’s Republic of China.