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

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

Dividends

Gladstone Investment pays an annual dividend of $0.96 per share and has a dividend yield of 6.3%. Goldman Sachs BDC pays an annual dividend of $1.28 per share and has a dividend yield of 13.7%. Gladstone Investment pays out 20.5% of its earnings in the form of a dividend. 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.

Volatility & Risk

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

Earnings & Valuation

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

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Gladstone Investment	$99.08 million	6.10	$184.75 million	$4.69	3.24
Goldman Sachs BDC	$365.57 million	2.87	$119.27 million	$0.65	14.34

Gladstone Investment has higher earnings, but lower revenue 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 Ratings

This is a breakdown of recent ratings and recommmendations for Gladstone Investment and Goldman Sachs BDC, as reported by MarketBeat.

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

Gladstone Investment currently has a consensus price target of $16.75, suggesting a potential upside of 10.28%. Goldman Sachs BDC has a consensus price target of $9.17, suggesting a potential downside of 1.69%. Given Gladstone Investment’s stronger consensus rating and higher probable upside, analysts plainly believe Gladstone Investment is more favorable than Goldman Sachs BDC.

Profitability

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

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

Institutional and Insider Ownership

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

Summary

Gladstone Investment beats Goldman Sachs BDC on 10 of the 16 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 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.