iShares Nasdaq Biotechnology Index Fund (NASDAQ: IBB) and Capital Southwest Corporation (NASDAQ:CSWC) are both investment trusts companies, but which is the better business? We will compare the two businesses based on the strength of their institutional ownership, analyst recommendations, valuation, profitability, risk, dividends and earnings.
Volatility & Risk
iShares Nasdaq Biotechnology Index Fund has a beta of 1.39, suggesting that its stock price is 39% more volatile than the S&P 500. Comparatively, Capital Southwest Corporation has a beta of 0.55, suggesting that its stock price is 45% less volatile than the S&P 500.
iShares Nasdaq Biotechnology Index Fund pays an annual dividend of $0.69 per share and has a dividend yield of 0.2%. Capital Southwest Corporation pays an annual dividend of $0.96 per share and has a dividend yield of 5.7%. iShares Nasdaq Biotechnology Index Fund pays out 0.8% of its earnings in the form of a dividend. Capital Southwest Corporation pays out 55.2% 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.
Valuation and Earnings
This table compares iShares Nasdaq Biotechnology Index Fund and Capital Southwest Corporation’s gross revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||NetIncome||Earnings Per Share||Price/Earnings Ratio|
|iShares Nasdaq Biotechnology Index Fund||N/A||N/A||N/A||$90.83||3.43|
|Capital Southwest Corporation||$23.50 million||11.49||$23.47 million||$1.74||9.68|
Capital Southwest Corporation has higher revenue and earnings than iShares Nasdaq Biotechnology Index Fund. iShares Nasdaq Biotechnology Index Fund is trading at a lower price-to-earnings ratio than Capital Southwest Corporation, indicating that it is currently the more affordable of the two stocks.
Insider and Institutional Ownership
60.5% of iShares Nasdaq Biotechnology Index Fund shares are held by institutional investors. Comparatively, 61.7% of Capital Southwest Corporation shares are held by institutional investors. 5.9% of Capital Southwest Corporation shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.
This table compares iShares Nasdaq Biotechnology Index Fund and Capital Southwest Corporation’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|iShares Nasdaq Biotechnology Index Fund||N/A||N/A||N/A|
|Capital Southwest Corporation||90.67%||5.09%||4.37%|
This is a breakdown of current ratings for iShares Nasdaq Biotechnology Index Fund and Capital Southwest Corporation, as provided by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|iShares Nasdaq Biotechnology Index Fund||0||0||1||0||3.00|
|Capital Southwest Corporation||0||1||3||0||2.75|
Capital Southwest Corporation has a consensus price target of $20.25, suggesting a potential upside of 20.18%. Given Capital Southwest Corporation’s higher possible upside, analysts plainly believe Capital Southwest Corporation is more favorable than iShares Nasdaq Biotechnology Index Fund.
Capital Southwest Corporation beats iShares Nasdaq Biotechnology Index Fund on 9 of the 13 factors compared between the two stocks.
iShares Nasdaq Biotechnology Index Fund Company Profile
iShares Nasdaq Biotechnology ETF (the Fund), formerly iShares Nasdaq Biotechnology Index Fund, is an exchange-traded fund (ETF). The Fund seeks investment results that correspond generally to the price and yield performance of the NASDAQ Biotechnology Index (the Index). The Index contains securities of NASDAQ listed companies that are classified according to the Industry Classification Benchmark as either biotechnology or pharmaceuticals, which also meet other eligibility criteria determined by NASDAQ. The Fund invests in a representative sample of securities included in the Index that collectively has an investment profile similar to the Index. Due to the use of representative sampling, the Fund may or may not hold all of the securities that are included in the Index. The Fund’s investment advisor is BlackRock Fund Advisors, which is indirectly owned by BlackRock, Inc.
Capital Southwest Corporation Company Profile
Capital Southwest Corporation is an investment company that specializes in providing customized financing to middle market companies in a range of industry segments located primarily in the United States. The Company is a specialty lending company. Its principal investment objective is to produce risk-adjusted returns by generating current income from debt investments and capital appreciation from its equity and equity related investments. It focuses on partnering with business owners, management teams and financial sponsors to provide financing solutions to fund growth, changes of control, or other corporate events. In allocating future investments, it focuses on investing in senior and subordinated debt securities secured by security interests in portfolio company assets, coupled with equity interests. It targets senior and subordinated investments in the lower middle market and private loan transactions, as well as first and second lien syndicated loans in middle market companies.
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