Comparing Gladstone Investment (NASDAQ:GAIN) and Goldman Sachs BDC (NYSE:GSBD)

Goldman Sachs BDC (NYSE:GSBD) and Gladstone Investment (NASDAQ:GAIN) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their earnings, analyst recommendations, dividends, valuation, institutional ownership, profitability and risk.

Risk and Volatility

Goldman Sachs BDC has a beta of 0.58, suggesting that its share price is 42% less volatile than the S&P 500. Comparatively, Gladstone Investment has a beta of 0.78, suggesting that its share price is 22% less volatile than the S&P 500.

Institutional and Insider Ownership

28.7% of Goldman Sachs BDC shares are held by institutional investors. Comparatively, 11.9% of Gladstone Investment shares are held by institutional investors. 0.1% of Goldman Sachs BDC shares are held by insiders. Comparatively, 2.4% of Gladstone Investment shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Dividends

Goldman Sachs BDC pays an annual dividend of $1.28 per share and has a dividend yield of 13.7%. Gladstone Investment pays an annual dividend of $0.96 per share and has a dividend yield of 6.5%. Goldman Sachs BDC pays out 196.9% 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 Investment pays out 20.5% of its earnings in the form of a dividend.

Profitability

This table compares Goldman Sachs BDC and Gladstone Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Goldman Sachs BDC	21.32%	10.94%	4.66%
Gladstone Investment	186.47%	6.05%	2.90%

Earnings & Valuation

This table compares Goldman Sachs BDC and Gladstone Investment”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Goldman Sachs BDC	$365.57 million	2.87	$119.27 million	$0.65	14.36
Gladstone Investment	$99.08 million	5.93	$184.75 million	$4.69	3.15

Gladstone Investment has lower revenue, but higher earnings than Goldman Sachs BDC. Gladstone Investment is trading at a lower price-to-earnings ratio than Goldman Sachs BDC, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current ratings and recommmendations for Goldman Sachs BDC and Gladstone Investment, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Goldman Sachs BDC	2	4	0	0	1.67
Gladstone Investment	0	1	3	0	2.75

Goldman Sachs BDC presently has a consensus price target of $9.17, suggesting a potential downside of 1.80%. Gladstone Investment has a consensus price target of $16.75, suggesting a potential upside of 13.48%. Given Gladstone Investment’s stronger consensus rating and higher possible upside, analysts plainly believe Gladstone Investment is more favorable than Goldman Sachs BDC.

Summary

Gladstone Investment beats Goldman Sachs BDC on 10 of the 16 factors compared between the two stocks.

About Goldman Sachs BDC

Goldman Sachs BDC, Inc. is a business development company specializing in middle market and mezzanine investment in private companies. It seeks to make capital appreciation through direct originations of secured debt, senior secured debt, junior secured debt, including first lien, first lien/last-out unitranche and second lien debt, unsecured debt, including mezzanine debt and, to a lesser extent, investments in equities. The fund primarily invests in United States. It seeks to invest between $10 million and $75 million in companies with EBITDA between $5 million and $75 million annually.

About Gladstone Investment

Gladstone Investment Corporation is business development company, specializes in lower middle market, mature stage, buyouts; refinancing existing debt; senior debt securities such as senior loans, senior term loans, lines of credit, and senior notes; senior subordinated debt securities such as senior subordinated loans and senior subordinated notes; junior subordinated debt securities such as subordinated notes and mezzanine loans; limited liability company interests, and warrants or options. The fund does not invest in start-ups. The fund seeks to invest in manufacturing, consumer products and business/consumer services sector. It seeks to invest in small and mid-sized companies based in the United States. The fund prefers to make debt investments between $5 million and $30 million and equity investments between $10 million and $40 million in companies. The fund seeks to invest in companies with revenue between $20 million and $100 million. The fund invests in companies with EBITDA from $3 million to $20 million. It seeks minority equity ownership and prefers to hold a board seat in its portfolio companies. It also prefers to take majority stake in its portfolio companies. The fund typically holds the investments for seven years and exits via sale or recapitalization, initial public offering, or sale to third party.