Gladstone Investment Corporation (NASDAQ: GAIN) and Fifth Street Senior Floating Rate Corp. (NASDAQ:FSFR) are both finance companies, but which is the better stock? We will compare the two businesses based on the strength of their profitability, dividends, institutional ownership, risk, valuation, earnings and analyst recommendations.

Valuation & Earnings

This table compares Gladstone Investment Corporation and Fifth Street Senior Floating Rate Corp.’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Gladstone Investment Corporation N/A N/A N/A $0.93 10.23
Fifth Street Senior Floating Rate Corp. N/A N/A N/A $0.47 18.92

Gladstone Investment Corporation is trading at a lower price-to-earnings ratio than Fifth Street Senior Floating Rate Corp., indicating that it is currently the more affordable of the two stocks.

Volatility and Risk

Gladstone Investment Corporation has a beta of 0.73, indicating that its stock price is 27% less volatile than the S&P 500. Comparatively, Fifth Street Senior Floating Rate Corp. has a beta of 0.34, indicating that its stock price is 66% less volatile than the S&P 500.

Institutional & Insider Ownership

18.1% of Gladstone Investment Corporation shares are owned by institutional investors. Comparatively, 23.3% of Fifth Street Senior Floating Rate Corp. shares are owned by institutional investors. 2.4% of Gladstone Investment Corporation shares are owned by company insiders. Comparatively, 0.4% of Fifth Street Senior Floating Rate Corp. shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Analyst Recommendations

This is a summary of recent ratings and target prices for Gladstone Investment Corporation and Fifth Street Senior Floating Rate Corp., as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Gladstone Investment Corporation 0 1 1 0 2.50
Fifth Street Senior Floating Rate Corp. 0 2 0 0 2.00

Gladstone Investment Corporation presently has a consensus target price of $9.50, suggesting a potential downside of 0.11%. Fifth Street Senior Floating Rate Corp. has a consensus target price of $9.25, suggesting a potential upside of 4.05%. Given Fifth Street Senior Floating Rate Corp.’s higher possible upside, analysts plainly believe Fifth Street Senior Floating Rate Corp. is more favorable than Gladstone Investment Corporation.

Dividends

Gladstone Investment Corporation pays an annual dividend of $0.77 per share and has a dividend yield of 8.1%. Fifth Street Senior Floating Rate Corp. pays an annual dividend of $0.76 per share and has a dividend yield of 8.5%. Gladstone Investment Corporation pays out 82.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Fifth Street Senior Floating Rate Corp. pays out 161.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Profitability

This table compares Gladstone Investment Corporation and Fifth Street Senior Floating Rate Corp.’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Gladstone Investment Corporation 55.52% 6.95% 4.21%
Fifth Street Senior Floating Rate Corp. 29.89% 7.27% 3.83%

Summary

Gladstone Investment Corporation beats Fifth Street Senior Floating Rate Corp. on 8 of the 12 factors compared between the two stocks.

Gladstone Investment Corporation Company Profile

Gladstone Investment Corporation is an externally managed, closed-end, non-diversified management investment company. The Company’s investment objectives are to achieve and grow current income by investing in debt securities of established businesses that it believes will provide stable earnings and cash flow to pay expenses, make principal and interest payments on its outstanding indebtedness and make distributions to stockholders that grow over time, and provide its stockholders with long-term capital appreciation in the value of its assets by investing in equity securities, generally in combination with the aforementioned debt securities, of businesses that it believes can grow over time to permit it to sell its equity investments for capital gains. It has investments in sectors, such as chemicals, plastics, and rubber, and home and office furnishings, house wares, and durable consumer products, among others. Its investment advisor is Gladstone Management Corporation.

Fifth Street Senior Floating Rate Corp. Company Profile

Fifth Street Senior Floating Rate Corp. is a closed-end, non-diversified management investment company. The Company operates as a specialty finance company. The Company’s investment objective is to maximize its portfolio’s total return by generating current income from its debt investments while seeking to preserve its capital. The Company invests in portfolio companies primarily in the form of senior loans. The Company invests in senior secured loans, including first lien, unitranche and second lien debt instruments. The Company may also invest in unsecured loans, including subordinated loans, issued by private middle market companies, and senior and subordinated loans issued by public companies and equity investments. The senior loans that the Company targets have final maturities of 4 to 7 years. The Company seeks to invest in senior loans made primarily to private middle market companies. Fifth Street Management LLC is the investment advisor of the Company.

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