Morgan Stanley Direct Lending Fund (NYSE:MSDL) and Gladstone Investment (NASDAQ:GAIN) Financial Contrast

Gladstone Investment (NASDAQ:GAIN) and Morgan Stanley Direct Lending Fund (NYSE:MSDL) are both small-cap finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their institutional ownership, profitability, earnings, valuation, risk, dividends and analyst recommendations.

Risk & Volatility

Gladstone Investment has a beta of 0.84, indicating that its stock price is 16% less volatile than the S&P 500. Comparatively, Morgan Stanley Direct Lending Fund has a beta of 0.26, indicating that its stock price is 74% less volatile than the S&P 500.

Dividends

Gladstone Investment pays an annual dividend of $0.96 per share and has a dividend yield of 6.8%. Morgan Stanley Direct Lending Fund pays an annual dividend of $2.00 per share and has a dividend yield of 12.8%. Gladstone Investment pays out 30.9% of its earnings in the form of a dividend. Morgan Stanley Direct Lending Fund pays out 121.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Profitability

This table compares Gladstone Investment and Morgan Stanley Direct Lending Fund’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Gladstone Investment	118.55%	6.77%	3.22%
Morgan Stanley Direct Lending Fund	35.92%	10.21%	4.70%

Earnings and Valuation

This table compares Gladstone Investment and Morgan Stanley Direct Lending Fund”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Gladstone Investment	$93.66 million	6.01	$65.32 million	$3.11	4.54
Morgan Stanley Direct Lending Fund	$416.08 million	3.26	$215.56 million	$1.65	9.46

Morgan Stanley Direct Lending Fund has higher revenue and earnings than Gladstone Investment. Gladstone Investment is trading at a lower price-to-earnings ratio than Morgan Stanley Direct Lending Fund, indicating that it is currently the more affordable of the two stocks.

Institutional & Insider Ownership

11.9% of Gladstone Investment shares are owned by institutional investors. 2.4% of Gladstone Investment shares are owned by company insiders. Comparatively, 0.2% of Morgan Stanley Direct Lending Fund shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Gladstone Investment and Morgan Stanley Direct Lending Fund, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Gladstone Investment	1	3	1	0	2.00
Morgan Stanley Direct Lending Fund	0	6	1	0	2.14

Morgan Stanley Direct Lending Fund has a consensus target price of $17.58, indicating a potential upside of 12.66%. Given Morgan Stanley Direct Lending Fund’s stronger consensus rating and higher possible upside, analysts plainly believe Morgan Stanley Direct Lending Fund is more favorable than Gladstone Investment.

Summary

Morgan Stanley Direct Lending Fund beats Gladstone Investment on 8 of the 15 factors compared between the two stocks.

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.

About Morgan Stanley Direct Lending Fund

Morgan Stanley Direct Lending Fund is a business development company. It is a non-diversified, externally managed specialty finance company focused on lending to middle-market companies. Morgan Stanley Direct Lending Fund is based in NEW YORK.