Blue Owl Capital (NYSE:OBDC) vs. FS KKR Capital (NYSE:FSK) Critical Analysis

Blue Owl Capital (NYSE:OBDC) and FS KKR Capital (NYSE:FSK) are both mid-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their risk, earnings, analyst recommendations, institutional ownership, profitability, valuation and dividends.

Analyst Ratings

This is a summary of current ratings and target prices for Blue Owl Capital and FS KKR Capital, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Blue Owl Capital	0	3	4	2	2.89
FS KKR Capital	1	4	0	0	1.80

Blue Owl Capital presently has a consensus target price of $16.17, suggesting a potential upside of 8.46%. FS KKR Capital has a consensus target price of $21.30, suggesting a potential upside of 0.31%. Given Blue Owl Capital’s stronger consensus rating and higher probable upside, equities research analysts plainly believe Blue Owl Capital is more favorable than FS KKR Capital.

Dividends

Blue Owl Capital pays an annual dividend of $1.48 per share and has a dividend yield of 9.9%. FS KKR Capital pays an annual dividend of $2.56 per share and has a dividend yield of 12.1%. Blue Owl Capital pays out 96.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. FS KKR Capital pays out 122.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Profitability

This table compares Blue Owl Capital and FS KKR Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Blue Owl Capital	37.26%	12.38%	5.37%
FS KKR Capital	29.98%	12.31%	5.47%

Insider & Institutional Ownership

42.8% of Blue Owl Capital shares are held by institutional investors. Comparatively, 36.3% of FS KKR Capital shares are held by institutional investors. 0.1% of Blue Owl Capital shares are held by company insiders. Comparatively, 0.3% of FS KKR Capital shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Risk & Volatility

Blue Owl Capital has a beta of 0.85, suggesting that its share price is 15% less volatile than the S&P 500. Comparatively, FS KKR Capital has a beta of 1.22, suggesting that its share price is 22% more volatile than the S&P 500.

Valuation and Earnings

This table compares Blue Owl Capital and FS KKR Capital”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Blue Owl Capital	$665.75 million	11.44	$753.61 million	$1.53	9.74
FS KKR Capital	$664.00 million	8.96	$696.00 million	$2.09	10.16

Blue Owl Capital has higher revenue and earnings than FS KKR Capital. Blue Owl Capital is trading at a lower price-to-earnings ratio than FS KKR Capital, indicating that it is currently the more affordable of the two stocks.

Summary

Blue Owl Capital beats FS KKR Capital on 11 of the 17 factors compared between the two stocks.

About Blue Owl Capital

Blue Owl Capital Corporation is a business development company. It specializes in direct and fund of fund investments. The fund makes investments in senior secured, direct lending or unsecured loans, subordinated loans or mezzanine loans and also considers equity-related securities including warrants and preferred stocks also pursues preferred equity investments, first lien, unitranche, and second lien term loans and common equity investments. Within private equity, it seeks to invest in growth, acquisitions, market or product expansion, refinancings and recapitalizations. It seeks to invest in middle market and upper middle market companies based in the United States, with EBITDA between $10 million and $250 million annually and/or annual revenue of $50 million and $2.5 billion at the time of investment. It seeks to invest in investments with maturities typically between three and ten years. It seeks to make investments generally ranging in size between $20 million and $250 million.

About FS KKR Capital

FS KKR Capital Corp. is a business development company specializing in investments in debt securities. It provides customized credit solutions to private middle market U.S. companies. It invest primarily in the senior secured debt and, to a lesser extent, the subordinated debt of private middle market U.S. companies. It seeks to purchase interests in loans through secondary market transactions or directly from the target companies as primary market investments. It also seeks to invest in first lien senior secured loans, second lien secured loans and, to a lesser extent, subordinated loans, or mezzanine loans. In connection with the debt investments, the firm also receives equity interests such as warrants or options as additional consideration. It also seek to purchase minority interests in the form of common or preferred equity in our target companies, either in conjunction with one of the debt investments or through a co-investment with a financial sponsor. Additionally, on an opportunistic basis, the fund may also invest in corporate bonds and similar debt securities. The fund does not seek to invest in start-up companies, turnaround situations, or companies with speculative business plans. It seeks to invest in small and middle-market companies based in United States. The fund seeks to invest in firms with annual revenue between $10 million to $2.5 billion. It focus on providing customized one-stop credit solutions to private upper middle market companies with annual EBITDA of $50 million to $100 million at the time of investment. It seeks to exit from securities by selling them in a privately negotiated over- the- counter market. For any investments that are not able to be sold within the secondary market, the firm seeks to exit such investments through repayment, an initial public offering of equity securities, merger, sale or recapitalization.