Head to Head Review: Gladstone Capital (NASDAQ:GLAD) versus Barings Bdc (NYSE:BBDC)

Gladstone Capital (NASDAQ:GLAD) and Barings Bdc (NYSE:BBDC) are both small-cap finance companies, but which is the superior stock? We will contrast the two companies based on the strength of their risk, analyst recommendations, dividends, earnings, profitability, valuation and institutional ownership.

Profitability

This table compares Gladstone Capital and Barings Bdc’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Gladstone Capital	45.15%	9.79%	5.31%
Barings Bdc	32.45%	10.08%	4.33%

Volatility & Risk

Gladstone Capital has a beta of 0.92, meaning that its share price is 8% less volatile than the S&P 500. Comparatively, Barings Bdc has a beta of 0.61, meaning that its share price is 39% less volatile than the S&P 500.

Valuation and Earnings

This table compares Gladstone Capital and Barings Bdc”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Gladstone Capital	$89.12 million	4.94	$58.11 million	$1.83	10.64
Barings Bdc	$279.21 million	3.28	$101.92 million	$0.85	10.28

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

Institutional and Insider Ownership

10.7% of Gladstone Capital shares are owned by institutional investors. Comparatively, 44.1% of Barings Bdc shares are owned by institutional investors. 3.8% of Gladstone Capital shares are owned by insiders. Comparatively, 0.6% of Barings Bdc shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Gladstone Capital and Barings Bdc, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Gladstone Capital	0	4	2	0	2.33
Barings Bdc	0	3	1	0	2.25

Gladstone Capital currently has a consensus price target of $21.67, suggesting a potential upside of 11.28%. Barings Bdc has a consensus price target of $9.50, suggesting a potential upside of 8.76%. Given Gladstone Capital’s stronger consensus rating and higher possible upside, research analysts clearly believe Gladstone Capital is more favorable than Barings Bdc.

Dividends

Gladstone Capital pays an annual dividend of $1.80 per share and has a dividend yield of 9.2%. Barings Bdc pays an annual dividend of $1.04 per share and has a dividend yield of 11.9%. Gladstone Capital pays out 98.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Barings Bdc pays out 122.4% 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 Capital has increased its dividend for 4 consecutive years and Barings Bdc has increased its dividend for 3 consecutive years.

Summary

Gladstone Capital beats Barings Bdc on 12 of the 17 factors compared between the two stocks.

About Gladstone Capital

Gladstone Capital Corporation is a business development company specializing in lower middle market, growth capital, add on acquisitions, change of control, buy & build strategies, debt refinancing, debt investments in senior term loans, revolving loans, secured first and second lien term loans, senior subordinated loans, unitranche loans, junior subordinated loans, and mezzanine loans and equity investments in the form of common stock, preferred stock, limited liability company interests, or warrants. It operates as a business development company. The fund also makes private equity investments in acquisitions, buyouts and recapitalizations, and refinancing existing debts. It targets small and medium-sized companies in United States. It is industry agnostic and seeks to invest in companies engaged in the business services, light and specialty manufacturing, niche industrial products and services, specialty consumer products and services, energy services, transportation and logistics, healthcare and education services, specialty chemicals, media and communications and aerospace and defense. The fund seeks to invest between $7 million and $30 million in companies that have between $20 million and $150 million in sales and EBITDA between $3 million and $25 million. It prefers to acquire minority stakes. It seeks to exit its investments through strategic acquisitions by other industry participants or financial buyers, initial public offerings of common stock, or other capital market transactions.

About Barings Bdc

Barings BDC, Inc. is a publicly traded, externally managed investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. It seeks to invest primarily in senior secured loans, first lien debt, unitranche, second lien debt, subordinated debt, equity co-investments and senior secured private debt investments in private middle-market companies that operate across a wide range of industries. It specializes in mezzanine, leveraged buyouts, management buyouts, ESOPs, change of control transactions, acquisition financings, growth financing, and recapitalizations in lower middle market, mature, and later stage companies. It invests in manufacturing and distribution; business services and technology; transportation and logistics; consumer product and services. It invests in United States. It invests in companies with EBITDA of $10 million to $75 million, typically in private equity sponsor backed.