iShares Nasdaq Biotechnology Index Fund (IBB) vs. Saratoga Investment Corp (SAR) Critical Review

iShares Nasdaq Biotechnology Index Fund (NASDAQ: IBB) and Saratoga Investment Corp (NYSE:SAR) are both finance companies, but which is the better investment? We will compare the two companies based on the strength of their dividends, institutional ownership, valuation, risk, analyst recommendations, earnings and profitability.

Insider & Institutional Ownership

57.5% of iShares Nasdaq Biotechnology Index Fund shares are held by institutional investors. Comparatively, 16.9% of Saratoga Investment Corp shares are held by institutional investors. 32.0% of Saratoga Investment Corp shares are held by company 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.

Profitability

This table compares iShares Nasdaq Biotechnology Index Fund and Saratoga Investment Corp’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
Saratoga Investment Corp 29.96% 8.79% 3.38%

Volatility & Risk

iShares Nasdaq Biotechnology Index Fund has a beta of 1.39, indicating that its share price is 39% more volatile than the S&P 500. Comparatively, Saratoga Investment Corp has a beta of 0.47, indicating that its share price is 53% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent ratings for iShares Nasdaq Biotechnology Index Fund and Saratoga Investment Corp, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
iShares Nasdaq Biotechnology Index Fund 0 0 1 0 3.00
Saratoga Investment Corp 0 2 3 0 2.60

Saratoga Investment Corp has a consensus price target of $23.50, indicating a potential upside of 4.58%. Given Saratoga Investment Corp’s higher probable upside, analysts plainly believe Saratoga Investment Corp is more favorable than iShares Nasdaq Biotechnology Index Fund.

Dividends

iShares Nasdaq Biotechnology Index Fund pays an annual dividend of $0.69 per share and has a dividend yield of 0.2%. Saratoga Investment Corp pays an annual dividend of $1.92 per share and has a dividend yield of 8.5%. Saratoga Investment Corp pays out 106.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Valuation & Earnings

This table compares iShares Nasdaq Biotechnology Index Fund and Saratoga Investment Corp’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
iShares Nasdaq Biotechnology Index Fund N/A N/A N/A N/A N/A
Saratoga Investment Corp $35.76 million 3.77 $10.87 million $1.81 12.41

Saratoga Investment Corp has higher revenue and earnings than iShares Nasdaq Biotechnology Index Fund.

Summary

Saratoga Investment Corp beats iShares Nasdaq Biotechnology Index Fund on 8 of the 12 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.

Saratoga Investment Corp Company Profile

Saratoga Investment Corp. is a specialty finance company. The Company is an externally managed, closed-end, non-diversified management investment company. The Company invests primarily in leveraged loans and mezzanine debt issued by private middle-market companies in the United States. Its investment objective is to generate current income and, to a lesser extent, capital appreciation from its investments. It purchases mezzanine debt and makes equity investments in middle market companies. It may invest in other investments, such as investments in distressed debt, including securities of companies in bankruptcy, foreign debt, private equity, securities of public companies that are not thinly traded and structured finance vehicles, such as collateralized loan obligation funds. Its leveraged loan portfolio consists primarily of first lien and second lien term loans. The Company’s investment activities are externally managed and advised by Saratoga Investment Advisors, LLC.

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