Critical Review: WhiteHorse Finance (NASDAQ:WHF) versus Golub Capital BDC (NASDAQ:GBDC)

Golub Capital BDC (NASDAQ:GBDC) and WhiteHorse Finance (NASDAQ:WHF) are both finance companies, but which is the better investment? We will compare the two companies based on the strength of their earnings, valuation, institutional ownership, risk, profitability, analyst recommendations and dividends.

Earnings & Valuation

This table compares Golub Capital BDC and WhiteHorse Finance”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Golub Capital BDC	$870.78 million	4.32	$376.65 million	$1.42	10.05
WhiteHorse Finance	$92.82 million	1.92	$10.85 million	$0.43	17.86

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Golub Capital BDC	43.25%	10.40%	4.61%
WhiteHorse Finance	12.91%	9.93%	4.14%

Analyst Recommendations

This is a summary of current ratings and price targets for Golub Capital BDC and WhiteHorse Finance, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Golub Capital BDC	0	2	2	0	2.50
WhiteHorse Finance	3	2	0	0	1.40

Golub Capital BDC presently has a consensus price target of $14.83, indicating a potential upside of 3.95%. WhiteHorse Finance has a consensus price target of $7.75, indicating a potential upside of 0.91%. Given Golub Capital BDC’s stronger consensus rating and higher possible upside, research analysts clearly believe Golub Capital BDC is more favorable than WhiteHorse Finance.

Volatility and Risk

Golub Capital BDC has a beta of 0.43, meaning that its stock price is 57% less volatile than the S&P 500. Comparatively, WhiteHorse Finance has a beta of 0.56, meaning that its stock price is 44% less volatile than the S&P 500.

Institutional & Insider Ownership

42.4% of Golub Capital BDC shares are held by institutional investors. Comparatively, 13.2% of WhiteHorse Finance shares are held by institutional investors. 3.6% of Golub Capital BDC shares are held by insiders. Comparatively, 2.5% of WhiteHorse Finance shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Dividends

Golub Capital BDC pays an annual dividend of $1.56 per share and has a dividend yield of 10.9%. WhiteHorse Finance pays an annual dividend of $1.54 per share and has a dividend yield of 20.1%. Golub Capital BDC pays out 109.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. WhiteHorse Finance pays out 358.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. WhiteHorse Finance has increased its dividend for 3 consecutive years. WhiteHorse Finance is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Golub Capital BDC beats WhiteHorse Finance on 13 of the 17 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 WhiteHorse Finance

WhiteHorse Finance, Inc. is business development company, non-diversified, closed end management company specializing in originating senior secured loans, lower middle market, growth capital industries. It invests in broadline retail, office services and supplies, building products, health care services, health care supplies, research and consulting services, application software, home furnishings, specialized consumer services, data processing and outsourced services, leisure facilities, cable, and satellite. It prefers to invest in United States. It typically invests between $5 million to $25 million in companies having enterprise value of between $50 million and $350 million.