Capital Southwest (NASDAQ:CSWC) and Elron Electronic Industries (OTCMKTS:ELRNF) are both small-cap finance companies, but which is the better business? We will contrast the two businesses based on the strength of their valuation, earnings, profitability, dividends, analyst recommendations, risk and institutional ownership.
Institutional & Insider Ownership
57.9% of Capital Southwest shares are owned by institutional investors. 6.7% of Capital Southwest shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.
This is a summary of recent ratings and recommmendations for Capital Southwest and Elron Electronic Industries, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Elron Electronic Industries||0||0||0||0||N/A|
Capital Southwest presently has a consensus price target of $22.33, indicating a potential upside of 4.56%. Given Capital Southwest’s higher probable upside, analysts plainly believe Capital Southwest is more favorable than Elron Electronic Industries.
This table compares Capital Southwest and Elron Electronic Industries’ net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Elron Electronic Industries||N/A||-9.75%||-9.06%|
Earnings & Valuation
This table compares Capital Southwest and Elron Electronic Industries’ gross revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Capital Southwest||$35.13 million||10.48||$39.30 million||$1.01||21.15|
|Elron Electronic Industries||$11.97 million||7.08||-$25.48 million||N/A||N/A|
Capital Southwest has higher revenue and earnings than Elron Electronic Industries.
Volatility & Risk
Capital Southwest has a beta of 0.26, meaning that its share price is 74% less volatile than the S&P 500. Comparatively, Elron Electronic Industries has a beta of 0.61, meaning that its share price is 39% less volatile than the S&P 500.
Capital Southwest pays an annual dividend of $1.44 per share and has a dividend yield of 6.7%. Elron Electronic Industries does not pay a dividend. Capital Southwest pays out 142.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Capital Southwest has increased its dividend for 3 consecutive years.
Capital Southwest beats Elron Electronic Industries on 12 of the 14 factors compared between the two stocks.
About Capital Southwest
Capital Southwest Corporation is a business development company specializing in credit and private equity and venture capital investments in middle market companies, mezzanine, later stage, mature, late venture, emerging growth, buyouts, recapitalizations and growth capital investments. It does not invest in startups, publicly traded companies, real estate developments, project finance opportunities, oil and gas exploration businesses, troubled companies, turnarounds, and companies in which significant senior management is departing. In lower middle market, the firm typically invests in growth financing, bolt-on acquisitions, new platform acquisitions, refinancing, dividend recapitalizations, sponsor-led buyouts, and management buyouts situations. The investment structures are Unitranche debt, subordinated debt, senior debt, first and second lien debt, and preferred and common equity. The firm makes equity co-investments alongside debt investments, up to 20% of total check and only makes non-control investments. It prefers to invest in Industrial manufacturing and services, value-added distribution, healthcare products and services, business services, specialty chemicals, food and beverage, tech-enabled services and SaaS models. The firm seeks to invest in energy services and products, industrial technologies, and specialty chemicals and products. Within energy services and products, the firm seeks to invest in each segment of the industry, including upstream, midstream and downstream, excluding exploration and production with a focus on differentiated products and services, equipment and tool rental, consumable products, and drilling and completion chemicals. Within industrial technologies, it seeks to invest in automation and process controls, handling and packaging equipment, industrial filtration and fluid handling, measurement, monitoring and testing, professional tools, and sensors and instrumentation. Within and specialty chemicals and products, the firm seeks to invest in businesses that develop and manufacture highly differentiated chemicals and products including adhesives, coatings and sealants, catalysts and absorbents, cosmeceuticals, fine chemicals, flavors and fragrances, performance lubricants, polymers, plastics and composites, chemical dispensing and filtration equipment, professional and industrial trade consumables and tools, engineered solutions for HVAC, plumbing, and electrical installations, specified high performance materials for fire protection and oilfield applications. It may also invest in exceptional opportunities in building products. The firm seeks to invest in the United States. The firm seeks to make investments ranging from $5 to $25 million in securities. It seeks to make equity investments up to $5 million and debt investments between $5 million and $20 million and co-invest in transaction size upto $40 million. It prefers to invest in companies with revenues approaching above $10 million, profitable operations, historical growth rate of at least 15 percent per year. . Within the lower middle market, it seeks to invest in with less than $15 million in EBITDA and also opportunistically invests in the upper middle market, generally defined as companies with EBITDA in excess of $50 million. In addition to making direct investments, the firm allocates capital to syndicated first and second lien term loans in the upper middle market. Criteria for Upper Middle Market Syndicated 1st Lien is EBITDA Size more than $30 million, Closing Leverage greater than 4 times, investment hold size between $5 million and $7 million, investment yield greater than 6.5%. Criteria for Upper Middle Market Syndicated 2nd Lien is EBITDA Size more than $50 million, Closing Leverage greater than 6 times, investment hold size between $5 million and $7 million, investment yield greater than 9%. It prefers to take a majority and minority stake. The firm has the flexibility to hold investments for very long period in its portfolio companies. It may also invest through warrants. The firm prefers to take Board participation in its portfolio companies. Capital Southwest Corporation was founded on April 19, 1961 and is based in Dallas, Texas.
About Elron Electronic Industries
Elron Electronic Industries Ltd., through its subsidiaries, provides technology products in the medical devices and cyber fields. The company offers BrainsGate, a minimally invasive treatment for ischemic stroke; Pocared, an automated microbiology lab system for infectious diseases diagnosis; CartiHeal implants for cartilage and bone repair in weight bearing joints; Notal Vision, a remote monitoring of patients at risk of vision loss from age-related macular degeneration; cyber intelligence platform that detects and defuses threats before they become cyberattacks; Alcide, a security and management tools for hybrid data centers; and SecuredTouch a behavioral biometrics for mobile transactions. It also provides Ironscales, an automated phishing prevention, detection, and response platform; Cynerio, a connected medical device; Kindite, a cloud encryption solution; OpenLegacy, a platform that enables the digital transformation process; PLYmedia, a platform for ad networks; Aqwise, a biological water and wastewater treatment solutions for the industrial and municipal markets; and Atlantium, a water disinfection solution. The company was founded in 1961 and is based in Tel Aviv, Israel. Elron Electronic Industries Ltd. is a subsidiary of Discount Investment Corporation Limited.
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