Critical Review: Saratoga Investment (NYSE:SAR) vs. Invesco (NYSE:IVZ)

Invesco (NYSE:IVZ) and Saratoga Investment (NYSE:SAR) are both finance companies, but which is the better investment? We will compare the two companies based on the strength of their risk, dividends, earnings, profitability, valuation, analyst recommendations and institutional ownership.

Volatility and Risk

Invesco has a beta of 1.48, suggesting that its stock price is 48% more volatile than the S&P 500. Comparatively, Saratoga Investment has a beta of 1.63, suggesting that its stock price is 63% more volatile than the S&P 500.

Dividends

Invesco pays an annual dividend of $0.62 per share and has a dividend yield of 6.2%. Saratoga Investment pays an annual dividend of $1.60 per share and has a dividend yield of 9.3%. Invesco pays out 24.3% of its earnings in the form of a dividend. Saratoga Investment pays out 64.3% 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. Invesco has raised its dividend for 11 consecutive years and Saratoga Investment has raised its dividend for 3 consecutive years.

Earnings and Valuation

This table compares Invesco and Saratoga Investment’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Invesco $6.12 billion 0.75 $688.30 million $2.55 3.94
Saratoga Investment $58.45 million 3.30 $55.74 million $2.49 6.94

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

Profitability

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

Net Margins Return on Equity Return on Assets
Invesco 8.15% 9.90% 2.62%
Saratoga Investment 43.11% 8.92% 4.56%

Institutional & Insider Ownership

65.2% of Invesco shares are owned by institutional investors. Comparatively, 18.3% of Saratoga Investment shares are owned by institutional investors. 1.9% of Invesco shares are owned by company insiders. Comparatively, 20.9% 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 company is poised for long-term growth.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Invesco and Saratoga Investment, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Invesco 3 9 2 0 1.93
Saratoga Investment 0 1 5 0 2.83

Invesco currently has a consensus price target of $10.65, suggesting a potential upside of 6.03%. Saratoga Investment has a consensus price target of $22.35, suggesting a potential upside of 29.42%. Given Saratoga Investment’s stronger consensus rating and higher probable upside, analysts plainly believe Saratoga Investment is more favorable than Invesco.

Summary

Saratoga Investment beats Invesco on 9 of the 17 factors compared between the two stocks.

About Invesco

Invesco Ltd. is a publicly owned investment manager. The firm provides its services to retail clients, institutional clients, high-net worth clients, public entities, corporations, unions, non-profit organizations, endowments, foundations, pension funds, financial institutions, and sovereign wealth funds. It manages separate client-focused equity and fixed income portfolios. The firm also launches equity, fixed income, commodity, multi-asset, and balanced mutual funds for its clients. It launches equity, fixed income, multi-asset, and balanced exchange-traded funds. The firm also launches and manages private funds. It invests in the public equity and fixed income markets across the globe. The firm also invests in alternative markets, such as commodities and currencies. For the equity portion of its portfolio, it invests in growth and value stocks of large-cap, mid-cap, and small-cap companies. For the fixed income portion of its portfolio, the firm invests in convertibles, government bonds, municipal bonds, treasury securities, and cash. It also invests in short term and intermediate term bonds, investment grade and high yield bonds, taxable and tax-free bonds, senior secured loans, and structured securities such as asset-backed securities, mortgage-backed securities, and commercial mortgage-backed securities. The firm employs absolute return, global macro, and long/short strategies. It employs quantitative analysis to make its investments. The firm was formerly known as Invesco Plc, AMVESCAP plc, Amvesco plc, Invesco PLC, Invesco MIM, and H. Lotery & Co. Ltd. Invesco Ltd. was founded in December 1935 and is based in Atlanta, Georgia with an additional office in Hamilton, Bermuda.

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. It seeks to invest in the United States. The firm primarily invests $5 million to $20 million in companies having EBITDA of $2 million or greater and revenues of $8 million to $150 million. It invests through direct lending as well as participation in loan syndicates. The firm was formerly known as GSC Investment Corp. Saratoga Investment Corp. is based in New York, New York with an additional office in Florham Park, New Jersey.

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