Rand Capital (NASDAQ:RAND) and Golub Capital BDC (NASDAQ:GBDC) are both small-cap finance companies, but which is the superior business? We will compare the two companies based on the strength of their dividends, profitability, earnings, analyst recommendations, valuation, institutional ownership and risk.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for Rand Capital and Golub Capital BDC, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Rand Capital 0 0 0 0 N/A
Golub Capital BDC 0 0 1 0 3.00

Golub Capital BDC has a consensus price target of $22.00, suggesting a potential upside of 23.73%. Given Golub Capital BDC’s higher probable upside, analysts plainly believe Golub Capital BDC is more favorable than Rand Capital.

Profitability

This table compares Rand Capital and Golub Capital BDC’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Rand Capital 23.63% 0.41% 0.32%
Golub Capital BDC 46.15% 8.03% 4.02%

Insider and Institutional Ownership

15.2% of Rand Capital shares are held by institutional investors. Comparatively, 39.2% of Golub Capital BDC shares are held by institutional investors. 9.7% of Rand Capital shares are held by insiders. Comparatively, 0.7% of Golub Capital BDC shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Earnings and Valuation

This table compares Rand Capital and Golub Capital BDC’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Rand Capital $2.11 million 8.50 -$390,000.00 N/A N/A
Golub Capital BDC $152.17 million 7.08 $81.97 million $1.29 13.78

Golub Capital BDC has higher revenue and earnings than Rand Capital.

Dividends

Golub Capital BDC pays an annual dividend of $1.28 per share and has a dividend yield of 7.2%. Rand Capital does not pay a dividend. Golub Capital BDC pays out 99.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Golub Capital BDC has increased its dividend for 3 consecutive years.

Summary

Golub Capital BDC beats Rand Capital on 10 of the 14 factors compared between the two stocks.

About Rand Capital

Rand Capital Corporation is a business development company specializing in venture capital and private equity investments. The firm prefers to make investments through equity or debt instruments in early venture, expansion stage, and in small to medium-sized privately held companies. It generally lends to more mature companies. The firm does not prefer to invest in real estate sector. It invests in companies that are engaged in the exploitation of new or unique products, technologies, or services. The firm invests in healthcare, consumer products, manufacturing, software, and professional services. It seeks to invest in companies based in the Western and Upstate New York region and its surrounding states with focus on Buffalo and Niagara region. The firm may invest in region within three to five hour drives from Western New York including Canada. It typically invests between $0.5 million and $1.5 million and the total investment in rounds is between $1 million and $5 million. The firm seeks to invest up to maximum of $3 million total per company as part of follow-on investments. It invest in startups and companies having annual revenue up to $10 million. The firm seeks to be a lead investor in companies within its geographical area and participates in syndicate/co-invest with other investors outside it. It prefers to invest in businesses that are unique or possess proprietary right. The firm prefers to be a minority investor and seeks to take a Board seat in its portfolio companies. It typically holds its investments for a period of five to seven years. Rand Capital Corporation was founded in 1969 and is based in Buffalo, New York.

About Golub Capital BDC

Golub Capital BDC, Inc. is a business development company and operates as an externally managed closed-end non-diversified management investment company. It invests in debt and minority equity investments in middle-market companies that are, in most cases, sponsored by private equity investors. The company seeks to invest in the United States. It primarily invests in senior secured, one stop, unitranche, second lien, subordinated and mezzanine loans of middle-market companies, and warrants.

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