Analyzing Runway Growth Finance (NASDAQ:RWAY) & Pagaya Technologies (NASDAQ:PGY)

Runway Growth Finance (NASDAQ:RWAY) and Pagaya Technologies (NASDAQ:PGY) are both small-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their risk, analyst recommendations, earnings, dividends, valuation, profitability and institutional ownership.

Analyst Recommendations

This is a breakdown of recent recommendations and price targets for Runway Growth Finance and Pagaya Technologies, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Runway Growth Finance	0	6	2	0	2.25
Pagaya Technologies	0	2	7	0	2.78

Runway Growth Finance currently has a consensus price target of $11.79, suggesting a potential upside of 13.38%. Pagaya Technologies has a consensus price target of $22.89, suggesting a potential upside of 86.09%. Given Pagaya Technologies’ stronger consensus rating and higher probable upside, analysts clearly believe Pagaya Technologies is more favorable than Runway Growth Finance.

Risk and Volatility

Runway Growth Finance has a beta of 0.58, meaning that its share price is 42% less volatile than the S&P 500. Comparatively, Pagaya Technologies has a beta of 6.33, meaning that its share price is 533% more volatile than the S&P 500.

Profitability

This table compares Runway Growth Finance and Pagaya Technologies’ net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Runway Growth Finance	19.32%	13.67%	6.97%
Pagaya Technologies	-14.58%	-3.10%	-1.55%

Institutional & Insider Ownership

64.6% of Runway Growth Finance shares are held by institutional investors. Comparatively, 57.1% of Pagaya Technologies shares are held by institutional investors. 1.5% of Runway Growth Finance shares are held by insiders. Comparatively, 49.6% of Pagaya Technologies shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares Runway Growth Finance and Pagaya Technologies”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Runway Growth Finance	$164.21 million	2.44	$44.34 million	$0.76	13.68
Pagaya Technologies	$812.05 million	1.09	-$128.44 million	($1.97)	-6.24

Runway Growth Finance has higher earnings, but lower revenue than Pagaya Technologies. Pagaya Technologies is trading at a lower price-to-earnings ratio than Runway Growth Finance, indicating that it is currently the more affordable of the two stocks.

Summary

Runway Growth Finance beats Pagaya Technologies on 8 of the 14 factors compared between the two stocks.

About Runway Growth Finance

Runway Growth Finance Corp. is a business development company specializing investments in senior-secured loans to late stage and growth companies. It prefers to make investments in companies engaged in the technology, life sciences, healthcare and information services, business services and select consumer services and products sectors. It prefers to investments in companies engaged in electronic equipment and instruments, systems software, hardware, storage and peripherals and specialized consumer services, application software, healthcare technology, internet software and services, data processing and outsourced services, internet retail, human resources and employment services, biotechnology, healthcare equipment and education services. It invests in senior secured loans between $10 million and $75 million.

About Pagaya Technologies

Pagaya Technologies Ltd., a product-focused technology company, deploys data science and proprietary artificial intelligence-powered technology for financial institutions and investors in the United States, Israel, the Cayman Islands, and internationally. The company develops and implements proprietary artificial intelligence technology and related software solutions to assist partners to originate loans and other assets. Its partners include high-growth financial technology companies, incumbent banks and financial institutions, auto finance providers, and residential real estate service providers. Pagaya Technologies Ltd. was incorporated in 2016 and is headquartered in New York, New York.