Main Street Capital (MAIN) & Chuy’s (CHUY) Critical Review

Main Street Capital (NYSE: MAIN) and Chuy’s (NASDAQ:CHUY) are both finance companies, but which is the better business? We will contrast the two businesses based on the strength of their analyst recommendations, profitability, institutional ownership, risk, dividends, valuation and earnings.

Volatility & Risk

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Main Street Capital has a beta of 0.92, meaning that its share price is 8% less volatile than the S&P 500. Comparatively, Chuy’s has a beta of -0.32, meaning that its share price is 132% less volatile than the S&P 500.

Valuation and Earnings

This table compares Main Street Capital and Chuy’s’ gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Main Street Capital $205.74 million 10.76 $170.62 million $2.39 15.76
Chuy’s $369.59 million 1.27 $28.95 million $0.96 28.91

Main Street Capital has higher earnings, but lower revenue than Chuy’s. Main Street Capital is trading at a lower price-to-earnings ratio than Chuy’s, indicating that it is currently the more affordable of the two stocks.

Dividends

Main Street Capital pays an annual dividend of $2.28 per share and has a dividend yield of 6.1%. Chuy’s does not pay a dividend. Main Street Capital pays out 95.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Main Street Capital has raised its dividend for 7 consecutive years.

Analyst Ratings

This is a summary of recent ratings and recommmendations for Main Street Capital and Chuy’s, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Main Street Capital 1 3 2 0 2.17
Chuy’s 0 7 2 0 2.22

Main Street Capital currently has a consensus price target of $38.25, indicating a potential upside of 1.62%. Chuy’s has a consensus price target of $26.89, indicating a potential downside of 2.65%. Given Main Street Capital’s higher probable upside, analysts clearly believe Main Street Capital is more favorable than Chuy’s.

Profitability

This table compares Main Street Capital and Chuy’s’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Main Street Capital 82.93% 10.34% 6.17%
Chuy’s 7.83% 9.40% 6.28%

Insider and Institutional Ownership

27.6% of Main Street Capital shares are owned by institutional investors. Comparatively, 95.6% of Chuy’s shares are owned by institutional investors. 5.3% of Main Street Capital shares are owned by company insiders. Comparatively, 3.3% of Chuy’s shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Summary

Main Street Capital beats Chuy’s on 10 of the 16 factors compared between the two stocks.

Main Street Capital Company Profile

Main Street Capital Corporation is a business development company specializing in long- term equity and debt investments in small and lower middle market companies. The firm focuses on investments in, subordinated loans, private equity, venture debt, mezzanine investments, mature, mid venture, industry consolidation, later stage, late venture, emerging growth, management buyouts, change of control transactions, ownership transitions, recapitalizations, strategic acquisitions, refinancing, business expansion capital, growth financings, family estate planning, and other growth initiatives primarily for later stage businesses. It invests in consumer discretionary, consumer staples, energy, healthcare, industrials, information technology, materials, telecommunication services, and utilities sectors. It does not seek to invest in start-up companies or companies with speculative business plans. It seeks to invest in traditional or basic businesses. The firm primarily invests in companies based in the Southern, South Central, and Southwestern regions of the United States but also considers other domestic investment opportunities. It typically invests between $2 million and $75 million in equity and $5 million to $50 million in debt, revenue between $10 million and $150 million, enterprise value between $3 million and $50 million, and EBITDA between $1 million and $20 million. The firm seeks to charge a fixed interest rate between 12 percent and 14 percent, payable in cash, in case of its mezzanine loan investments. The firm typically invests in the form of term debt with equity participation and/or direct equity investments. It prefers to maintain fully diluted minority and majority equity positions in its portfolio companies of 5 percent to 50 percent, and may have controlling interests in some instances. The firm also co-invests with other investment firms. It seeks to exit its debt investments through the repayment of the investment from internally generated cash flow and/or refinancing within a period of three to seven years. It participates in warrants, PIK (Payment in Kind) interest, convertible securities, junior secured or unsecured, senior secured debt, unitranche debt, equity related, common equity, and preferred equity. Main Street Capital Corporation was incorporated on March 9, 2007 and is based at Houston, Texas.

Chuy’s Company Profile

Chuy's Holdings, Inc., through its subsidiaries, owns and operates restaurants under the Chuy's name in Texas and 19 states in the Southeastern and Midwestern United States. As of December 31, 2017, the company operated 91 Chuy's restaurants in 19 states. Chuy's Holdings, Inc. was founded in 1982 and is headquartered in Austin, Texas.

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