Critical Survey: B. Riley Financial (NASDAQ:RILY) versus Great Elm Capital (NASDAQ:GECC)

B. Riley Financial (NASDAQ:RILY) and Great Elm Capital (NASDAQ:GECC) are both small-cap business services companies, but which is the better stock? We will contrast the two businesses based on the strength of their dividends, institutional ownership, valuation, earnings, analyst recommendations, profitability and risk.

Analyst Recommendations

This is a summary of recent ratings for B. Riley Financial and Great Elm Capital, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
B. Riley Financial	0	0	0	0	N/A
Great Elm Capital	0	0	0	0	N/A

Dividends

B. Riley Financial pays an annual dividend of $2.00 per share and has a dividend yield of 11.9%. Great Elm Capital pays an annual dividend of $1.40 per share and has a dividend yield of 13.5%. B. Riley Financial pays out -39.9% of its earnings in the form of a dividend. Great Elm Capital pays out 63.6% 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.

Profitability

This table compares B. Riley Financial and Great Elm Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
B. Riley Financial	-9.28%	-25.84%	-1.75%
Great Elm Capital	46.02%	12.63%	4.71%

Volatility and Risk

B. Riley Financial has a beta of 1.32, indicating that its stock price is 32% more volatile than the S&P 500. Comparatively, Great Elm Capital has a beta of 1.6, indicating that its stock price is 60% more volatile than the S&P 500.

Earnings and Valuation

This table compares B. Riley Financial and Great Elm Capital’s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
B. Riley Financial	$1.65 billion	0.31	-$99.91 million	($5.01)	-3.36
Great Elm Capital	$35.83 million	2.73	$25.33 million	$2.20	4.71

Great Elm Capital has lower revenue, but higher earnings than B. Riley Financial. B. Riley Financial is trading at a lower price-to-earnings ratio than Great Elm Capital, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

50.2% of B. Riley Financial shares are owned by institutional investors. Comparatively, 38.8% of Great Elm Capital shares are owned by institutional investors. 32.9% of B. Riley Financial shares are owned by company insiders. Comparatively, 10.2% of Great Elm Capital shares are owned 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.

Summary

Great Elm Capital beats B. Riley Financial on 9 of the 13 factors compared between the two stocks.

About B. Riley Financial

B. Riley Financial, Inc., through its subsidiaries, provides financial services to corporate, institutional, and high net worth clients in North America, Australia, the Asia Pacific, and Europe. The company operates through six segments: Capital Markets, Wealth Management, Financial Consulting, Auction and Liquidation, Communications, and Consumer. The Capital Markets segments offers investment banking, equity research, institutional sales and trading, securities lending, fund and asset management, direct lending, venture capital, proprietary trading, and investment services; merger and acquisition, restructuring advisory, and recapitalization services; public and private equity offerings; and debt financing solutions. This segment also trades in equity securities. The Wealth Management segment provides wealth management and tax services. The Financial Consulting segment offers bankruptcy restructuring and turnaround management, forensic accounting and litigation support, valuation and appraisal, and real estate services. The Auction and Liquidation Segment provides auction and liquidation services. The Communications segment offers dial-up, mobile broadband and digital subscriber line services under the NetZero and Juno brands; cloud communication services; VoIP cloud-based technology and communication devices and subscription services through magicJack; and mobile phone voice, text, and data services and devices through Marconi Wireless. The Consumer segment sells laptop and computer accessories. The company was formerly known as Great American Group, Inc. and changed its name to B. Riley Financial, Inc. in November 2014. B. Riley Financial, Inc. was founded in 1973 and is headquartered in Los Angeles, California.

About Great Elm Capital

Great Elm Capital Corp. is a business development company which specializes in loan and mezzanine, middle market investments. It invests in the debt instruments of middle market companies. The fund prefers to invest in media, commercial services and supplies, healthcare, telecommunication services, communications equipment. It typically makes equity investments between $3 million and $10 million in companies with revenues between $3 million and $75 million.