Critical Analysis: Golub Capital BDC (NASDAQ:GBDC) & Main Street Capital (NYSE:MAIN)

Golub Capital BDC (NASDAQ:GBDC) and Main Street Capital (NYSE:MAIN) are both mid-cap finance companies, but which is the superior business? We will compare the two companies based on the strength of their dividends, analyst recommendations, earnings, risk, profitability, valuation and institutional ownership.

Risk and Volatility

Golub Capital BDC has a beta of 0.39, indicating that its stock price is 61% less volatile than the S&P 500. Comparatively, Main Street Capital has a beta of 0.72, indicating that its stock price is 28% less volatile than the S&P 500.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Golub Capital BDC	24.64%	10.20%	4.47%
Main Street Capital	74.86%	12.01%	6.47%

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Golub Capital BDC and Main Street Capital, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Golub Capital BDC	1	1	4	1	2.71
Main Street Capital	1	7	3	0	2.18

Golub Capital BDC presently has a consensus target price of $14.00, suggesting a potential upside of 7.36%. Main Street Capital has a consensus target price of $59.14, suggesting a potential upside of 14.80%. Given Main Street Capital’s higher probable upside, analysts plainly believe Main Street Capital is more favorable than Golub Capital BDC.

Institutional & Insider Ownership

42.4% of Golub Capital BDC shares are held by institutional investors. Comparatively, 20.3% of Main Street Capital shares are held by institutional investors. 1.4% of Golub Capital BDC shares are held by company insiders. Comparatively, 3.8% of Main Street Capital shares are held by company 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.

Valuation & Earnings

This table compares Golub Capital BDC and Main Street Capital”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Golub Capital BDC	$870.78 million	3.90	$376.65 million	$0.77	16.94
Main Street Capital	$566.39 million	8.46	$493.40 million	$4.75	10.85

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

Dividends

Golub Capital BDC pays an annual dividend of $1.32 per share and has a dividend yield of 10.1%. Main Street Capital pays an annual dividend of $3.12 per share and has a dividend yield of 6.1%. Golub Capital BDC pays out 171.4% 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 pays out 65.7% of its earnings in the form of a dividend. Main Street Capital has raised its dividend for 4 consecutive years.

Summary

Main Street Capital beats Golub Capital BDC on 11 of the 18 factors compared between the two stocks.

About Golub Capital BDC

Golub Capital BDC, Inc. (GBDC) is a business development company and operates as an externally managed closed-end non-diversified management investment company. It invests in debt and minority equity investments in middle-market companies that are, in most cases, sponsored by private equity investors. It typically invests in diversified consumer services, automobiles, healthcare technology, insurance, health care equipment and supplies, hotels, restaurants and leisure, healthcare providers and services, IT services and specialty retails. It seeks to invest in the United States. It primarily invests in first lien traditional senior debt, first lien one stop, junior debt and equity, senior secured, one stop, unitranche, second lien, subordinated and mezzanine loans of middle-market companies, and warrants.

About Main Street Capital

Main Street Capital Corporation is a business development company specializes in equity capital to lower middle market companies. The firm specializing in recapitalizations, management buyouts, refinancing, family estate planning, management buyouts, refinancing, industry consolidation, mature, later stage emerging growth. The firm also provides debt capital to middle market companies for acquisitions, management buyouts, growth financings, recapitalizations, and refinancing. The firm seeks to partner with entrepreneurs, business owners and management teams and generally provides “one stop” financing alternatives within its lower middle market portfolio. It prefers to invest in air freight and logistics, auto components, building products, chemicals, commercial services, computers, construction and engineering, consumer finance, consumer services, electronic equipment, energy equipment and services, financial services, health care equipment, health care providers, hotels, restaurants, and leisure, internet software and services, IT Services, machinery, oil, gas and consumable fuels, paper and forest products, professional and industrial services, road and rail, software, specialty retail, telecommunication, consumer discretionary, energy, materials, technology, and transportation. The firm typically invests in lower middle market companies generally with annual revenues between $10 million and $150 million. It prefers to invest in ranging between $5 million and $100 million in equity investment and enterprise value in ranging between $3 million and $20 million. The firm typically prefers to invest in the range of $5 million and $150 million per transaction in debt investment value and in the range of $3 million and $75 million in annual EBITDA in between $3 million and $25 million in lower middle market $5 million and $75 million in credit solution. The firm’s middle market debt investments are made in businesses that are generally larger in size than its lower middle market portfolio companies. It takes 5 percent minority and up to 50 percent majority equity investments. Main Street Capital Corporation was founded in 2007 and is based in Houston, Texas with an additional office in Chojnów, Poland.