Oaktree Specialty Lending (NASDAQ:OCSL) vs. Bread Financial (NYSE:BFH) Financial Survey

Oaktree Specialty Lending (NASDAQ:OCSL) and Bread Financial (NYSE:BFH) are both small-cap finance companies, but which is the superior business? We will compare the two companies based on the strength of their risk, analyst recommendations, valuation, profitability, dividends, earnings and institutional ownership.

Profitability

This table compares Oaktree Specialty Lending and Bread Financial’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Oaktree Specialty Lending	28.81%	12.22%	5.63%
Bread Financial	13.87%	26.24%	3.34%

Analyst Ratings

This is a summary of recent recommendations and price targets for Oaktree Specialty Lending and Bread Financial, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Oaktree Specialty Lending	0	3	3	0	2.50
Bread Financial	4	6	2	0	1.83

Oaktree Specialty Lending currently has a consensus target price of $20.67, suggesting a potential upside of 6.36%. Bread Financial has a consensus target price of $36.55, suggesting a potential upside of 13.39%. Given Bread Financial’s higher probable upside, analysts plainly believe Bread Financial is more favorable than Oaktree Specialty Lending.

Dividends

Oaktree Specialty Lending pays an annual dividend of $2.20 per share and has a dividend yield of 11.3%. Bread Financial pays an annual dividend of $0.84 per share and has a dividend yield of 2.6%. Oaktree Specialty Lending pays out 145.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Bread Financial pays out 5.9% of its earnings in the form of a dividend. Oaktree Specialty Lending has increased its dividend for 4 consecutive years. Oaktree Specialty Lending is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Insider & Institutional Ownership

36.8% of Oaktree Specialty Lending shares are held by institutional investors. Comparatively, 99.5% of Bread Financial shares are held by institutional investors. 0.3% of Oaktree Specialty Lending shares are held by insiders. Comparatively, 0.6% of Bread Financial shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Earnings & Valuation

This table compares Oaktree Specialty Lending and Bread Financial’s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Oaktree Specialty Lending	$122.38 million	12.54	$117.33 million	$1.51	12.87
Bread Financial	$4.30 billion	0.37	$718.00 million	$14.32	2.25

Bread Financial has higher revenue and earnings than Oaktree Specialty Lending. Bread Financial is trading at a lower price-to-earnings ratio than Oaktree Specialty Lending, indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Oaktree Specialty Lending has a beta of 1.06, meaning that its stock price is 6% more volatile than the S&P 500. Comparatively, Bread Financial has a beta of 1.93, meaning that its stock price is 93% more volatile than the S&P 500.

Summary

Bread Financial beats Oaktree Specialty Lending on 9 of the 17 factors compared between the two stocks.

About Oaktree Specialty Lending

Oaktree Specialty Lending Corporation is a business development company. The fund specializing in investments in middle market, bridge financing, first and second lien debt financing, unsecured and mezzanine loan, mezzanine debt, senior and junior secured debt, expansions, sponsor-led acquisitions, preferred equity, and management buyouts in small and mid-sized companies. It seeks to invest in education services, business services, retail and consumer, healthcare, manufacturing, food and restaurants, construction and engineering. The firm also seeks investment in media, advertising sectors, software, IT services, pharmaceuticals, biotechnology, real estate management and development, chemicals, machinery, and internet and direct marketing retail sectors. It invests between $5 million to $75 million principally in the form of one-stop, first lien, and second lien debt investments, which may include an equity co-investment component in companies. The firm invest in companies having enterprise value between $20 million and $150 million and EBITDA between $3 million and $50 million. The fund has a hold size of up to $75 million and may underwrite transactions up to $100 million. It primarily invests in North America. The fund seeks to be a lead investor in its portfolio companies.

About Bread Financial

Bread Financial Holdings, Inc. provides tech-forward payment and lending solutions to customers and consumer-based industries in North America. It offers credit card and other loans financing services, including risk management solutions, account origination, and funding services for private label and co-brand credit card programs, as well as through Bread partnerships; and Comenity-branded general purpose cash-back credit. The company also manages and services the loans it originates for private label, co-brand, and general-purpose credit card programs, and installment loans and split-pay products; and provides marketing, and data and analytics services. In addition, it offers an enhanced digital suite that includes a unified software development kit, which provides access to its suite of products, as well as promotes credit payment options earlier in the shopping experience. Further, the company through Bread, a digital payments platform and robust suite of application programming interfaces allows merchants and partners to integrate online point-of-sale financing and other digital payment products. It offers its products under the Bread CashbackTM, Bread PayTM, and Bread SavingsTM brands. The company was formerly known as Alliance Data Systems Corporation and changed its name to Bread Financial Holdings, Inc. in March 2022. Bread Financial Holdings, Inc. was incorporated in 1995 and is headquartered in Columbus, Ohio.