Head to Head Comparison: Sound Point Meridian Capital (NYSE:SPMC) & Gladstone Investment (NASDAQ:GAIN)

Gladstone Investment (NASDAQ:GAIN) and Sound Point Meridian Capital (NYSE:SPMC) are both small-cap finance companies, but which is the superior investment? We will contrast the two companies based on the strength of their profitability, analyst recommendations, earnings, institutional ownership, dividends, valuation and risk.

Analyst Ratings

This is a summary of recent ratings and price targets for Gladstone Investment and Sound Point Meridian Capital, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Gladstone Investment	0	0	3	1	3.25
Sound Point Meridian Capital	1	2	1	0	2.00

Gladstone Investment presently has a consensus target price of $16.75, suggesting a potential upside of 5.95%. Sound Point Meridian Capital has a consensus target price of $15.12, suggesting a potential upside of 79.95%. Given Sound Point Meridian Capital’s higher possible upside, analysts plainly believe Sound Point Meridian Capital is more favorable than Gladstone Investment.

Institutional & Insider Ownership

11.8% of Gladstone Investment shares are held by institutional investors. 2.2% of Gladstone Investment shares are held by insiders. Comparatively, 0.9% of Sound Point Meridian Capital shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.

Earnings & Valuation

This table compares Gladstone Investment and Sound Point Meridian Capital”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Gladstone Investment	$99.08 million	6.35	$184.75 million	$4.18	3.78
Sound Point Meridian Capital	$72.51 million	2.38	-$118.49 million	($5.78)	-1.45

Gladstone Investment has higher revenue and earnings than Sound Point Meridian Capital. Sound Point Meridian Capital is trading at a lower price-to-earnings ratio than Gladstone Investment, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Gladstone Investment and Sound Point Meridian Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Gladstone Investment	158.95%	5.90%	2.88%
Sound Point Meridian Capital	N/A	N/A	N/A

Dividends

Gladstone Investment pays an annual dividend of $0.96 per share and has a dividend yield of 6.1%. Sound Point Meridian Capital pays an annual dividend of $2.40 per share and has a dividend yield of 28.6%. Gladstone Investment pays out 23.0% of its earnings in the form of a dividend. Sound Point Meridian Capital pays out -41.5% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Sound Point Meridian Capital is clearly the better dividend stock, given its higher yield and lower payout ratio.

Volatility and Risk

Gladstone Investment has a beta of 0.77, meaning that its share price is 23% less volatile than the S&P 500. Comparatively, Sound Point Meridian Capital has a beta of 1.14, meaning that its share price is 14% more volatile than the S&P 500.

Summary

Gladstone Investment beats Sound Point Meridian Capital on 13 of the 17 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 Sound Point Meridian Capital

Sound Point Meridian Capital Inc. is an externally managed, non-diversified closed-end management investment company. Its investment objective is to generate high current income, with a secondary objective to generate capital appreciation, by investing primarily in third-party collateralized loan obligation equity and mezzanine tranches. Sound Point Meridian Capital Inc. is based in NEW YORK.