National Securities reiterated their sell rating on shares of Gladstone Capital (NASDAQ:GLAD) in a research report report published on Friday morning. National Securities currently has a $7.00 price target on the investment management company’s stock.

“ Gladstone’s NAV/share declined by 6.1% Q/Q to $8.32 from $8.86 as a result of Francis Drilling being placed on non-accrual status effective 7/1/18. The company marked down both of its second lien debt tranches materially, from 76.2% of cost and 75.9% of cost to 28.7% of cost for each tranche, respectively.

 There are a couple worrisome things worth noting here. Firstly, the non-accrual was effective 7/1/18 and yet a day before this Francis had both its second lien term debt tranches marked at about 75% of cost. Secondly, and even worse, is that the company did not disclose the non-accrual status of Francis in the subsequent events in its 6/30/18 10-Q which was filed with the SEC on 7/31/18. On 6/30/18 earnings call which took place on 8/1/18, this was also not mentioned.

 We find this to be deeply worrisome, as not disclosing material events like this should be viewed as a red flag. Additionally, we expect that with second lien debt in a bankrupt oil & gas company that the loans at Francis will be written down to zero. This should cause further decreases in NAV/share, in our opinion.

 During the quarter, Gladstone also restructured its $30.0mm investment in Sunshine Media Holdings which drove a $28.2mm realized loss on the quarter. At 6/30/18, Sunshine’s total position had an unrealized loss of $27.7 million.

 We are revising our fiscal 2019 NII/share estimate to $0.84 from $0.88 and are rolling out our fiscal 2020 NII/share estimate of $0.84. We expect the company to rely heavily on fee waivers through fiscal 2019 to meet its quarterly dividend. Our $7 price target represents an 11% discount to our F4Q20 NAV/share estimate of $7.89,” the firm’s analyst commented.

GLAD has been the topic of several other reports. BidaskClub upgraded Gladstone Capital from a hold rating to a buy rating in a report on Thursday, November 15th. Zacks Investment Research lowered Gladstone Capital from a buy rating to a hold rating in a report on Monday, October 22nd. One investment analyst has rated the stock with a sell rating, two have issued a hold rating and two have assigned a buy rating to the stock. Gladstone Capital presently has an average rating of Hold and a consensus target price of $9.00.

NASDAQ GLAD opened at $8.91 on Friday. Gladstone Capital has a fifty-two week low of $7.80 and a fifty-two week high of $9.92. The company has a debt-to-equity ratio of 0.46, a quick ratio of 3.67 and a current ratio of 3.67. The stock has a market cap of $261.39 million, a price-to-earnings ratio of 10.48 and a beta of 1.03.

Gladstone Capital (NASDAQ:GLAD) last posted its earnings results on Wednesday, November 14th. The investment management company reported $0.21 earnings per share for the quarter, missing the Thomson Reuters’ consensus estimate of $0.22 by ($0.01). Gladstone Capital had a net margin of 41.00% and a return on equity of 9.83%. The company had revenue of $11.26 million for the quarter, compared to the consensus estimate of $12.00 million. Analysts anticipate that Gladstone Capital will post 0.89 earnings per share for the current fiscal year.

The business also recently announced a dividend, which will be paid on Friday, November 30th. Shareholders of record on Tuesday, November 20th will be issued a dividend of $0.07 per share. The ex-dividend date is Monday, November 19th. Gladstone Capital’s dividend payout ratio (DPR) is currently 98.82%.

Institutional investors have recently bought and sold shares of the company. Bank of Montreal Can increased its stake in shares of Gladstone Capital by 6.1% in the third quarter. Bank of Montreal Can now owns 260,000 shares of the investment management company’s stock worth $2,470,000 after purchasing an additional 15,000 shares during the period. Millennium Management LLC bought a new position in shares of Gladstone Capital in the first quarter worth about $568,000. Novare Capital Management LLC increased its stake in shares of Gladstone Capital by 37.0% in the third quarter. Novare Capital Management LLC now owns 32,750 shares of the investment management company’s stock worth $311,000 after purchasing an additional 8,850 shares during the period. Cornerstone Wealth Management LLC increased its stake in shares of Gladstone Capital by 5.3% in the third quarter. Cornerstone Wealth Management LLC now owns 239,268 shares of the investment management company’s stock worth $25,054,000 after purchasing an additional 12,030 shares during the period. Finally, JPMorgan Chase & Co. increased its stake in shares of Gladstone Capital by 8.0% in the first quarter. JPMorgan Chase & Co. now owns 91,192 shares of the investment management company’s stock worth $785,000 after purchasing an additional 6,792 shares during the period. Institutional investors and hedge funds own 11.97% of the company’s stock.

Gladstone Capital Company Profile

Gladstone Capital Corporation is a private equity and a venture capital fund specializing in lower middle market, growth capital, add on acquisitions, debt investments in senior loans, second lien loans, senior subordinated loans, junior subordinated loans, and mezzanine loans and equity investments in the form of common stock, preferred stock, limited liability company interests, or warrants.

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