Saratoga Investment (NYSE:SAR – Get Free Report) and Gladstone Investment (NASDAQ:GAIN – Get Free Report) are both small-cap finance companies, but which is the superior business? We will compare the two companies based on the strength of their analyst recommendations, risk, profitability, dividends, valuation, institutional ownership and earnings.
Risk and Volatility
Saratoga Investment has a beta of 0.54, suggesting that its stock price is 46% less volatile than the S&P 500. Comparatively, Gladstone Investment has a beta of 0.78, suggesting that its stock price is 22% less volatile than the S&P 500.
Analyst Recommendations
This is a summary of current ratings and price targets for Saratoga Investment and Gladstone Investment, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Saratoga Investment | 0 | 6 | 0 | 0 | 2.00 |
| Gladstone Investment | 0 | 4 | 1 | 0 | 2.20 |
Valuation & Earnings
This table compares Saratoga Investment and Gladstone Investment”s top-line revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Saratoga Investment | $148.85 million | 2.39 | $28.09 million | $2.44 | 9.00 |
| Gladstone Investment | $93.66 million | 6.22 | $65.32 million | $3.11 | 4.71 |
Gladstone Investment has lower revenue, but higher earnings than Saratoga Investment. Gladstone Investment is trading at a lower price-to-earnings ratio than Saratoga Investment, indicating that it is currently the more affordable of the two stocks.
Dividends
Saratoga Investment pays an annual dividend of $3.00 per share and has a dividend yield of 13.7%. Gladstone Investment pays an annual dividend of $0.96 per share and has a dividend yield of 6.6%. Saratoga Investment pays out 123.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Gladstone Investment pays out 30.9% of its earnings in the form of a dividend.
Insider and Institutional Ownership
19.1% of Saratoga Investment shares are owned by institutional investors. Comparatively, 11.9% of Gladstone Investment shares are owned by institutional investors. 10.0% of Saratoga Investment shares are owned by company insiders. Comparatively, 2.4% of Gladstone Investment shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.
Profitability
This table compares Saratoga Investment and Gladstone Investment’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Saratoga Investment | 30.61% | 9.19% | 3.09% |
| Gladstone Investment | 118.55% | 6.77% | 3.22% |
Summary
Gladstone Investment beats Saratoga Investment on 9 of the 16 factors compared between the two stocks.
About Saratoga Investment
Saratoga Investment Corp. is a business development company specializing in leveraged and management buyouts, acquisition financings, growth financings, recapitalization, debt refinancing, and transitional financing transactions at the lower end of middle market companies. It structures its investments as debt and equity by investing through first and second lien loans, mezzanine debt, co-investments, select high yield bonds, senior secured bonds, unsecured bonds, and preferred and common equity. The firm prefers to invest in aerospace, automotive aftermarket and services, business products and services, consumer products and services, education, environmental services, industrial services, financial services, food and beverage, healthcare products and services, logistics, distribution, manufacturing, restaurants services, food services, software services, technology services, specialty chemical, media and telecommunications. It seeks to invest in the United States. The firm primarily invests $5 million to $50 million in companies having EBITDA of $2 million or greater and revenues of $8 million to $250 million. The firm prefer to take a majority stake. It invests through direct lending as well as participation in loan syndicates. The firm was formerly known as GSC Investment Corp. Saratoga Investment Corp. was formed on 2007 and is based in New York, New York with an additional office in Florham Park, New Jersey.
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.
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