Head to Head Comparison: Garrison Capital (GARS) & Gladstone Investment (GAIN)

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

Institutional & Insider Ownership

25.9% of Garrison Capital shares are held by institutional investors. Comparatively, 15.3% of Gladstone Investment shares are held by institutional investors. 6.4% of Garrison Capital shares are held by insiders. Comparatively, 2.4% of Gladstone Investment shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.



Profitability

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

Net Margins Return on Equity Return on Assets
Garrison Capital 32.34% 9.58% 4.38%
Gladstone Investment 104.00% 7.64% 4.61%

Risk and Volatility

Garrison Capital has a beta of 0.2, indicating that its share price is 80% less volatile than the S&P 500. Comparatively, Gladstone Investment has a beta of 0.53, indicating that its share price is 47% less volatile than the S&P 500.

Earnings & Valuation

This table compares Garrison Capital and Gladstone Investment’s top-line revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Garrison Capital $36.62 million 3.70 $6.22 million $1.07 7.90
Gladstone Investment $58.35 million 6.68 $60.68 million $0.82 14.48

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

Dividends

Garrison Capital pays an annual dividend of $1.12 per share and has a dividend yield of 13.3%. Gladstone Investment pays an annual dividend of $0.80 per share and has a dividend yield of 6.7%. Garrison Capital pays out 104.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Gladstone Investment pays out 97.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Analyst Recommendations

This is a breakdown of recent recommendations for Garrison Capital and Gladstone Investment, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Garrison Capital 0 0 2 0 3.00
Gladstone Investment 0 1 2 0 2.67

Garrison Capital presently has a consensus price target of $10.50, suggesting a potential upside of 24.26%. Gladstone Investment has a consensus price target of $10.50, suggesting a potential downside of 11.54%. Given Garrison Capital’s stronger consensus rating and higher possible upside, equities analysts clearly believe Garrison Capital is more favorable than Gladstone Investment.

Summary

Gladstone Investment beats Garrison Capital on 8 of the 15 factors compared between the two stocks.

Garrison Capital Company Profile

Garrison Capital Inc. is a managed, closed-end, non-diversified management investment company. The Company’s investment objective is to generate current income and capital appreciation by making investments primarily in debt securities and loans of the United States-based middle-market companies, which it defines as those having annual earnings before interest, taxes and depreciation, or EBITDA, of certain amount. It invests or provides direct lending in first lien senior secured loans, second lien senior secured loans, one-stop senior secured loans or unitranche loans, subordinated or mezzanine loans, unsecured consumer loans and to a lesser extent, selected equity co-investments in middle-market companies. The Company intends to generate risk-adjusted net returns by assembling a portfolio of investments. The Company’s investment advisor is Garrison Capital Advisers LLC.

Gladstone Investment Company Profile

Gladstone Investment Corporation is a business development company specializing in buyouts; recapitalizations; 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. 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 sales between $20 million and $100 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 its investments for seven years and exits via sale or recapitalization, initial public offering, or sale to third party.

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