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

Analyst Ratings

This is a summary of recent recommendations for Fifth Street Senior Floating Rate Corp. and Gladstone Capital Corporation, as provided by MarketBeat.com.

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

Fifth Street Senior Floating Rate Corp. currently has a consensus price target of $9.25, suggesting a potential upside of 4.52%. Gladstone Capital Corporation has a consensus price target of $9.08, suggesting a potential downside of 1.27%. Given Fifth Street Senior Floating Rate Corp.’s higher probable upside, analysts clearly believe Fifth Street Senior Floating Rate Corp. is more favorable than Gladstone Capital Corporation.

Institutional & Insider Ownership

23.3% of Fifth Street Senior Floating Rate Corp. shares are held by institutional investors. Comparatively, 14.5% of Gladstone Capital Corporation shares are held by institutional investors. 0.4% of Fifth Street Senior Floating Rate Corp. shares are held by insiders. Comparatively, 6.5% of Gladstone Capital Corporation shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Risk and Volatility

Fifth Street Senior Floating Rate Corp. has a beta of 0.33, indicating that its stock price is 67% less volatile than the S&P 500. Comparatively, Gladstone Capital Corporation has a beta of 1.2, indicating that its stock price is 20% more volatile than the S&P 500.

Profitability

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

Net Margins Return on Equity Return on Assets
Fifth Street Senior Floating Rate Corp. 29.89% 7.27% 3.83%
Gladstone Capital Corporation 85.01% 9.88% 6.26%

Dividends

Fifth Street Senior Floating Rate Corp. pays an annual dividend of $2.28 per share and has a dividend yield of 25.8%. Gladstone Capital Corporation pays an annual dividend of $0.84 per share and has a dividend yield of 9.1%. Fifth Street Senior Floating Rate Corp. pays out 485.1% 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 Corporation pays out 62.2% of its earnings in the form of a dividend.

Earnings & Valuation

This table compares Fifth Street Senior Floating Rate Corp. and Gladstone Capital Corporation’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Fifth Street Senior Floating Rate Corp. N/A N/A N/A $0.47 18.83
Gladstone Capital Corporation N/A N/A N/A $1.35 6.81

Gladstone Capital 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.

Summary

Gladstone Capital Corporation beats Fifth Street Senior Floating Rate Corp. on 8 of the 11 factors compared between the two stocks.

About Fifth Street Senior Floating Rate Corp.

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.

About Gladstone Capital Corporation

Gladstone Capital Corporation is a closed-end, non-diversified management investment company, operating as a business development company (BDC). The objectives of the Company 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 to provide its stockholders with long-term capital appreciation in the value of its assets by investing in equity securities of established businesses that it believes can grow over time to permit it to sell its equity investments for capital gains. The Company is focused on investing in lower middle-market companies in the United States. It has investments in south, Midwest, west and northeast of the United States. Its portfolio allocation includes debt investments and equity investments.

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