Gladstone Capital Corporation (NASDAQ: GLAD) and Fifth Street Senior Floating Rate Corp. (NASDAQ:FSFR) are both small-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their dividends, profitability, analyst recommendations, institutional ownership, earnings, valuation and risk.

Dividends

Gladstone Capital Corporation pays an annual dividend of $0.84 per share and has a dividend yield of 9.1%. Fifth Street Senior Floating Rate Corp. pays an annual dividend of $2.28 per share and has a dividend yield of 25.9%. Gladstone Capital Corporation pays out 62.2% of its earnings in the form of a dividend. Fifth Street Senior Floating Rate Corp. pays out 485.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Volatility & Risk

Gladstone Capital Corporation has a beta of 1.2, meaning that its share price is 20% more volatile than the S&P 500. Comparatively, Fifth Street Senior Floating Rate Corp. has a beta of 0.33, meaning that its share price is 67% less volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings and price targets for Gladstone Capital Corporation and Fifth Street Senior Floating Rate Corp., as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Gladstone Capital Corporation 1 1 1 0 2.00
Fifth Street Senior Floating Rate Corp. 0 2 0 0 2.00

Gladstone Capital Corporation presently has a consensus target price of $9.08, indicating a potential downside of 1.38%. Fifth Street Senior Floating Rate Corp. has a consensus target price of $9.25, indicating a potential upside of 4.88%. Given Fifth Street Senior Floating Rate Corp.’s higher probable upside, analysts plainly believe Fifth Street Senior Floating Rate Corp. is more favorable than Gladstone Capital Corporation.

Valuation & Earnings

This table compares Gladstone Capital Corporation and Fifth Street Senior Floating Rate Corp.’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Gladstone Capital Corporation N/A N/A N/A $1.35 6.82
Fifth Street Senior Floating Rate Corp. N/A N/A N/A $0.47 18.77

Gladstone Capital Corporation is trading at a lower price-to-earnings ratio than Fifth Street Senior Floating Rate Corp., indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Gladstone Capital Corporation and Fifth Street Senior Floating Rate Corp.’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Gladstone Capital Corporation 85.01% 9.88% 6.26%
Fifth Street Senior Floating Rate Corp. 29.89% 7.27% 3.83%

Insider & Institutional Ownership

14.5% of Gladstone Capital Corporation shares are held by institutional investors. Comparatively, 23.3% of Fifth Street Senior Floating Rate Corp. shares are held by institutional investors. 6.5% of Gladstone Capital Corporation shares are held by insiders. Comparatively, 0.4% of Fifth Street Senior Floating Rate Corp. shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Summary

Gladstone Capital Corporation beats Fifth Street Senior Floating Rate Corp. on 8 of the 12 factors compared between the two stocks.

Gladstone Capital Corporation Company Profile

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.

Fifth Street Senior Floating Rate Corp. Company Profile

Fifth Street Senior Floating Rate Corp. is a closed-end, non-diversified management investment company. The Company operates as a specialty finance company. The Company’s investment objective is to maximize its portfolio’s total return by generating current income from its debt investments while seeking to preserve its capital. The Company invests in portfolio companies primarily in the form of senior loans. The Company invests in senior secured loans, including first lien, unitranche and second lien debt instruments. The Company may also invest in unsecured loans, including subordinated loans, issued by private middle market companies, and senior and subordinated loans issued by public companies and equity investments. The senior loans that the Company targets have final maturities of 4 to 7 years. The Company seeks to invest in senior loans made primarily to private middle market companies. Fifth Street Management LLC is the investment advisor of the Company.

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