Gladstone Capital (NASDAQ: GLAD) and Solar Capital (NASDAQ:SLRC) are both small-cap finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their analyst recommendations, profitability, earnings, institutional ownership, risk, dividends and valuation.
Volatility and Risk
Gladstone Capital has a beta of 1.11, meaning that its share price is 11% more volatile than the S&P 500. Comparatively, Solar Capital has a beta of 0.55, meaning that its share price is 45% less volatile than the S&P 500.
This is a summary of current ratings for Gladstone Capital and Solar Capital, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Gladstone Capital currently has a consensus price target of $9.16, indicating a potential upside of 2.37%. Solar Capital has a consensus price target of $23.67, indicating a potential upside of 13.18%. Given Solar Capital’s stronger consensus rating and higher possible upside, analysts plainly believe Solar Capital is more favorable than Gladstone Capital.
Earnings and Valuation
This table compares Gladstone Capital and Solar Capital’s top-line revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Gladstone Capital||$39.23 million||6.08||$17.18 million||$0.90||9.94|
|Solar Capital||$143.34 million||6.16||$70.43 million||$1.67||12.52|
Solar Capital has higher revenue and earnings than Gladstone Capital. Gladstone Capital is trading at a lower price-to-earnings ratio than Solar Capital, indicating that it is currently the more affordable of the two stocks.
Insider & Institutional Ownership
13.7% of Gladstone Capital shares are held by institutional investors. Comparatively, 62.2% of Solar Capital shares are held by institutional investors. 5.9% of Gladstone Capital shares are held by insiders. Comparatively, 5.9% of Solar Capital shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.
Gladstone Capital pays an annual dividend of $0.84 per share and has a dividend yield of 9.4%. Solar Capital pays an annual dividend of $1.60 per share and has a dividend yield of 7.7%. Gladstone Capital pays out 93.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Solar Capital pays out 95.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Gladstone Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.
This table compares Gladstone Capital and Solar Capital’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
Solar Capital beats Gladstone Capital on 10 of the 16 factors compared between the two stocks.
About Gladstone Capital
Gladstone Capital Corporation is a closed-end, non-diversified management investment company, operating as a business development company (BDC). The objectives of the Company are to achieve and grow current income by investing in debt securities of established businesses that it believes will provide stable earnings and cash flow to pay expenses, make principal and interest payments on its outstanding indebtedness and make distributions to stockholders that grow over time, and to provide its stockholders with long-term capital appreciation in the value of its assets by investing in equity securities of established businesses that it believes can grow over time to permit it to sell its equity investments for capital gains. The Company is focused on investing in lower middle-market companies in the United States. It has investments in south, Midwest, west and northeast of the United States. Its portfolio allocation includes debt investments and equity investments.
About Solar Capital
Solar Capital Ltd. is a closed-end, externally managed, non-diversified management investment company. The Company’s investment objective is to generate both current income and capital appreciation through debt and equity investments. It invests in privately held the United States middle market companies. It invests in leveraged middle market companies in the form of senior secured loans, unitranche loans, mezzanine loans and equity securities. It may also invest in public companies that are thinly traded. Its business is focused primarily on the direct origination of investments through portfolio companies or their financial sponsors. Its investments generally range between $5 million and $100 million each. In addition, the Company may invest a portion of its portfolio in other types of investments, which it refers to as opportunistic investments. The Company’s investment activities are managed by Solar Capital Partners, LLC (Solar Capital Partners or the Investment Advisor).
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