The Gabelli Convertible and Income Securities Fund (NYSE:GCV – Get Rating) and Hercules Capital (NYSE:HTGC – Get Rating) are both small-cap finance companies, but which is the better stock? We will compare the two businesses based on the strength of their institutional ownership, risk, valuation, earnings, analyst recommendations, profitability and dividends.
Analyst Ratings
This is a summary of current ratings and target prices for The Gabelli Convertible and Income Securities Fund and Hercules Capital, as reported by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| The Gabelli Convertible and Income Securities Fund | 0 | 0 | 0 | 0 | N/A |
| Hercules Capital | 1 | 1 | 4 | 0 | 2.50 |
Hercules Capital has a consensus price target of $15.14, indicating a potential upside of 16.04%. Given Hercules Capital’s higher probable upside, analysts clearly believe Hercules Capital is more favorable than The Gabelli Convertible and Income Securities Fund.
Profitability
| Net Margins | Return on Equity | Return on Assets | |
| The Gabelli Convertible and Income Securities Fund | N/A | N/A | N/A |
| Hercules Capital | 31.73% | 13.87% | 6.53% |
Dividends
The Gabelli Convertible and Income Securities Fund pays an annual dividend of $0.48 per share and has a dividend yield of 10.9%. Hercules Capital pays an annual dividend of $1.56 per share and has a dividend yield of 12.0%. Hercules Capital pays out 205.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Hercules Capital has increased its dividend for 3 consecutive years. Hercules Capital is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Volatility & Risk
The Gabelli Convertible and Income Securities Fund has a beta of 0.91, meaning that its stock price is 9% less volatile than the S&P 500. Comparatively, Hercules Capital has a beta of 1.41, meaning that its stock price is 41% more volatile than the S&P 500.
Valuation and Earnings
This table compares The Gabelli Convertible and Income Securities Fund and Hercules Capital’s gross revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| The Gabelli Convertible and Income Securities Fund | N/A | N/A | N/A | N/A | N/A |
| Hercules Capital | $321.69 million | 5.78 | $102.08 million | $0.76 | 17.17 |
Hercules Capital has higher revenue and earnings than The Gabelli Convertible and Income Securities Fund.
Institutional and Insider Ownership
23.8% of Hercules Capital shares are owned by institutional investors. 0.8% of The Gabelli Convertible and Income Securities Fund shares are owned by insiders. Comparatively, 1.4% of Hercules Capital shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.
Summary
Hercules Capital beats The Gabelli Convertible and Income Securities Fund on 11 of the 12 factors compared between the two stocks.
About The Gabelli Convertible and Income Securities Fund
The Gabelli Convertible and Income Securities Fund Inc. is a closed-ended balanced mutual fund launched by GAMCO Investors, Inc. The fund is managed by Gabelli Funds, LLC. It invests in public equity and fixed income markets. The fund seeks to invest in stocks of companies operating across diversified sectors. It primarily invests in convertible securities and other debt and equity securities. The fund benchmarks the performance of its portfolio against the Standard & Poor's 500 Index, Barclays Government/Credit Bond Index, and Lipper Convertible Securities Fund Average. It was formerly known as Gabelli Convertible Securities Fund Inc. The Gabelli Convertible and Income Securities Fund Inc. was formed on December 19, 1988 and is domiciled in the United States.
About Hercules Capital
Hercules is the largest non-bank lender to venture capital-backed companies at all stages of development in a broadly diversified variety of technology, life sciences, and sustainable and renewable technology industries. With over a decade of experience in venture debt, Hercules is uniquely positioned to quickly create innovative financing solutions that perfectly fit within a company’s existing capital structure and map to its business objectives. Recognized as the industry leader, Hercules understands the flexibility these types of companies need and has the experience to work closely with them, even through challenging times, to help them reach critical milestones. Hercules’ deep sector expertise, geographic presence and its strong capital base have made Hercules the lender of choice for more than 480 innovative companies.
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