Gladstone Investment (NASDAQ:GAIN) vs. Bain Capital Specialty Finance (NYSE:BCSF) Financial Comparison

Bain Capital Specialty Finance (NYSE:BCSF) and Gladstone Investment (NASDAQ:GAIN) are both small-cap finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their profitability, risk, earnings, analyst recommendations, valuation, dividends and institutional ownership.

Dividends

Bain Capital Specialty Finance pays an annual dividend of $1.68 per share and has a dividend yield of 11.8%. Gladstone Investment pays an annual dividend of $0.96 per share and has a dividend yield of 6.8%. Bain Capital Specialty Finance pays out 101.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Gladstone Investment pays out 44.2% of its earnings in the form of a dividend. Bain Capital Specialty Finance has raised its dividend for 4 consecutive years. Bain Capital Specialty Finance is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Volatility and Risk

Bain Capital Specialty Finance has a beta of 0.81, indicating that its share price is 19% less volatile than the S&P 500. Comparatively, Gladstone Investment has a beta of 0.93, indicating that its share price is 7% less volatile than the S&P 500.

Analyst Ratings

This is a summary of current recommendations and price targets for Bain Capital Specialty Finance and Gladstone Investment, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Bain Capital Specialty Finance	0	2	1	0	2.33
Gladstone Investment	0	3	1	1	2.60

Bain Capital Specialty Finance currently has a consensus target price of $16.50, suggesting a potential upside of 15.93%. Gladstone Investment has a consensus target price of $13.50, suggesting a potential downside of 3.78%. Given Bain Capital Specialty Finance’s higher possible upside, research analysts clearly believe Bain Capital Specialty Finance is more favorable than Gladstone Investment.

Institutional & Insider Ownership

11.9% of Gladstone Investment shares are held by institutional investors. 0.6% of Bain Capital Specialty Finance shares are held by company insiders. Comparatively, 2.4% of Gladstone Investment shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Profitability

This table compares Bain Capital Specialty Finance and Gladstone Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Bain Capital Specialty Finance	37.90%	11.41%	4.92%
Gladstone Investment	83.78%	7.33%	3.53%

Earnings & Valuation

This table compares Bain Capital Specialty Finance and Gladstone Investment”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Bain Capital Specialty Finance	$125.44 million	7.36	$119.42 million	$1.66	8.57
Gladstone Investment	$93.66 million	5.73	$65.32 million	$2.17	6.47

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

Summary

Bain Capital Specialty Finance beats Gladstone Investment on 9 of the 17 factors compared between the two stocks.

About Bain Capital Specialty Finance

Bain Capital Specialty Finance, Inc. is business development company specializing in direct loans to middle-market companies. The fund seeks to invest in senior investments with a first or second lien on collateral, senior first lien, stretch senior, senior second lien, unitranche, mezzanine debt, junior securities, other junior investments, and secondary purchases of assets or portfolios that primarily consist of middle-market corporate debt. It typically invests in companies with EBITDA between $10 million and $150 million.

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.