Solar Capital (NASDAQ: SLRC) and Gladstone Capital (NASDAQ:GLAD) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their valuation, profitability, risk, institutional ownership, analyst recommendations, earnings and dividends.
Solar Capital pays an annual dividend of $1.64 per share and has a dividend yield of 7.9%. Gladstone Capital pays an annual dividend of $0.84 per share and has a dividend yield of 9.7%. Solar Capital pays out 101.2% 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 pays out 100.0% 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 is a summary of current ratings and price targets for Solar Capital and Gladstone Capital, as provided by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
Solar Capital presently has a consensus price target of $23.67, indicating a potential upside of 13.45%. Gladstone Capital has a consensus price target of $8.88, indicating a potential upside of 2.11%. Given Solar Capital’s stronger consensus rating and higher probable upside, research analysts plainly believe Solar Capital is more favorable than Gladstone Capital.
This table compares Solar Capital and Gladstone Capital’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
Volatility and Risk
Solar Capital has a beta of 0.54, indicating that its stock price is 46% less volatile than the S&P 500. Comparatively, Gladstone Capital has a beta of 1.09, indicating that its stock price is 9% more volatile than the S&P 500.
Earnings and Valuation
This table compares Solar Capital and Gladstone Capital’s top-line revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Solar Capital||$143.34 million||6.15||$70.43 million||$1.62||12.88|
|Gladstone Capital||$39.23 million||5.91||$17.18 million||$0.84||10.36|
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 and Institutional Ownership
61.8% of Solar Capital shares are held by institutional investors. Comparatively, 13.6% of Gladstone Capital shares are held by institutional investors. 5.9% of Solar Capital shares are held by company insiders. Comparatively, 5.9% of Gladstone Capital shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.
Solar Capital beats Gladstone Capital on 10 of the 16 factors compared between the two stocks.
About Solar Capital
Solar Capital Ltd is a business development company that seeks investment opportunities in middle market companies located in the US. The fund targets companies operating in the fields of aerospace & defense, automobile, banking, beverage, food & tobacco, buildings & real estate, broadcasting & entertainment, cargo transport, chemicals, plastics & rubber, containers, packaging & glass, diversified or conglomerate manufacturing, diversified financial services, electronics, farming & agriculture, finance, grocery, healthcare, education & childcare, home, office furnishings & durable consumer products, hotels, motels, inns & gaming, insurance, IT services, leisure, amusement & entertainment, machinery, mining, steel, iron & non-precious metals, personal & nondurable consumer products, personal, food &services, personal transportation, professional services, retail stores, software, telecommunications, textiles and leather, and utilities. It invests in both public & private companies and provides financing for debt, mezzanine and buyout capital requirements with an investment size ranging from $5 to $100 million.
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.
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