Critical Survey: Hercules Capital (NYSE:HTGC) versus Ellsworth Growth and Income Fund (NYSE:ECF)

Hercules Capital (NYSE:HTGC) and Ellsworth Growth and Income Fund (NYSE:ECF) are both finance companies, but which is the superior business? We will contrast the two companies based on the strength of their dividends, analyst recommendations, risk, valuation, institutional ownership, earnings and profitability.

Analyst Recommendations

This is a breakdown of recent ratings for Hercules Capital and Ellsworth Growth and Income Fund, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Hercules Capital	0	3	3	0	2.50
Ellsworth Growth and Income Fund	0	0	0	0	0.00

Hercules Capital currently has a consensus price target of $19.83, suggesting a potential upside of 4.11%. Given Hercules Capital’s stronger consensus rating and higher probable upside, research analysts plainly believe Hercules Capital is more favorable than Ellsworth Growth and Income Fund.

Dividends

Hercules Capital pays an annual dividend of $1.60 per share and has a dividend yield of 8.4%. Ellsworth Growth and Income Fund pays an annual dividend of $0.52 per share and has a dividend yield of 5.5%. Hercules Capital pays out 79.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Risk & Volatility

Hercules Capital has a beta of 1.39, suggesting that its share price is 39% more volatile than the S&P 500. Comparatively, Ellsworth Growth and Income Fund has a beta of 1.11, suggesting that its share price is 11% more volatile than the S&P 500.

Earnings and Valuation

This table compares Hercules Capital and Ellsworth Growth and Income Fund”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Hercules Capital	$410.85 million	7.53	$337.48 million	$2.02	9.43
Ellsworth Growth and Income Fund	N/A	N/A	N/A	N/A	N/A

Hercules Capital has higher revenue and earnings than Ellsworth Growth and Income Fund.

Profitability

This table compares Hercules Capital and Ellsworth Growth and Income Fund’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Hercules Capital	65.07%	17.88%	9.16%
Ellsworth Growth and Income Fund	N/A	N/A	N/A

Insider & Institutional Ownership

19.7% of Hercules Capital shares are owned by institutional investors. Comparatively, 35.9% of Ellsworth Growth and Income Fund shares are owned by institutional investors. 1.9% of Hercules Capital shares are owned by company insiders. Comparatively, 0.5% of Ellsworth Growth and Income Fund shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company will outperform the market over the long term.

Summary

Hercules Capital beats Ellsworth Growth and Income Fund on 10 of the 12 factors compared between the two stocks.

About Hercules Capital

Hercules Capital, Inc. is a business development company. The firm specializing in providing venture debt, debt, senior secured loans, and growth capital to privately held venture capital-backed companies at all stages of development from startups to expansion stage including select publicly listed companies and select special opportunity lower middle market companies that require additional capital to fund acquisitions, recapitalizations and refinancing and established-stage companies. The firm provides growth capital financing solutions for capital extension; management buy-out and corporate spin-out financing solutions; company, asset specific, or intellectual property acquisition financing; convertible, subordinated and/or mezzanine loans; domestic and international corporate expansion; vendor financing; revenue acceleration by sales and marketing development, and manufacturing expansion. It provides asset-based financing with a focus on cash flow; accounts receivable facilities; equipment loans or leases; equipment acquisition; facilities build-out and/or expansion; working capital revolving lines of credit; inventory. The firm also provides bridge financing to IPO or mergers and acquisitions or technology acquisition; dividend recapitalizations and other sources of investor liquidity; cash flow financing to protect against share price volatility; competitor acquisition; pre-IPO financing for extra cash on the balance sheet; public company financing to continue asset growth and production capacity; short-term bridge financing; and strategic and intellectual property acquisition financings. It also focuses on customized financing solutions, emerging growth, mid venture, and late venture financing. The firm invests primarily in structured debt with warrants and, to a lesser extent, in senior debt and equity investments. The firm generally seeks to invest in companies that have been operating for at least six to 12 months prior to the date of their investment. It prefers to invest in technology, SaaS Finance, energy technology, sustainable and renewable technology, and life sciences. Within technology the firm focuses on advanced specialty materials and chemicals; communication and networking, consumer and business products; consumer products and services, digital media and consumer internet; electronics and computer hardware; enterprise software and services; gaming; healthcare services; information services; business services; media, content and information; mobile; resource management; security software; semiconductors; semiconductors and hardware; and software sector. Within energy technology, it invests in agriculture; clean technology; energy and renewable technology, fuels, and power technology; geothermal; smart grid and energy efficiency and monitoring technologies; solar; and wind. Within life sciences, the firm invests in biopharmaceuticals; biotechnology tools; diagnostics; drug discovery, drug platform, development, and delivery; medical devices and equipment; surgical devices; therapeutics; pharma services; and specialty pharmaceuticals. Within sustainable and renewables, it invests in Vehicle Technology, Energy Generation and Storage, Ag Technology, Advanced Materials, and Industry 4.0. It also invests in educational services. The firm invests primarily in United States based companies and considers investment in the West Coast, Mid-Atlantic regions, Southeast and Midwest, particularly in the areas of software, biotech, and information services. The firm prefers to invest between $5 million and $200 million in equity per transactions. It invests generally between $1 million and $40 million in companies focused primarily on business services, communications, electronics, hardware, and healthcare services. The firm invests primarily in private companies but also have investments in public companies. For equity investments, the firm seeks to represent a controlling interest in its portfolio companies which may exceed 25% of the voting securities of such companies. The firm seeks to invest a limited portion of its assets in equipment-based loans to early-stage prospective portfolio companies. These loans are generally for amounts up to $3 million but may be up to $15 million for certain energy technology venture investments. The firm allows certain debt investments have the right to convert a portion of the debt investment into equity. It also co-invests with other private equity firms. The firm seeks to exit its investments through initial public offering, a private sale of equity interest to a third party, a merger or an acquisition of the company or a purchase of the equity position by the company or one of its stockholders. The firm has structured debt with warrants which typically have maturities of between two and seven years with an average of three years; senior debt with an investment horizon of less than three years; equipment loans with an investment horizon ranging from three to four years; and equity related securities with an investment horizon ranging from three to seven years. The firm prefers to invest through its balance sheet capital. The firm formerly known as Hercules Technology Growth Capital, Inc. Hercules Capital, Inc. was founded in December 2003 and is based in San Mateo, California with additional offices in North America and Europe.

About Ellsworth Growth and Income Fund

Ellsworth Growth and Income Fund Ltd. is a closed-ended equity mutual fund launched by GAMCO Investors, Inc. The fund is managed by Gabelli Funds, LLC. It invests in the public equity markets. The fund primarily invests in convertible securities. It invests in stocks of companies across market capitalizations. The fund benchmarks the performance of its portfolio against the Bank of America Merrill Lynch All U.S. Convertibles Index, Barclays Balanced U.S. Convertibles Index, and S&P 500 Index. It was formerly known as Ellsworth Fund Ltd. Ellsworth Growth and Income Fund Ltd. was formed on June 27, 1986 and is domiciled in the United States.