Fidus Investment Corporation (NASDAQ: FDUS) and Golub Capital BDC (NASDAQ:GBDC) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, dividends, analyst recommendations, risk, profitability, valuation and earnings.

Profitability

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

Net Margins Return on Equity Return on Assets
Fidus Investment Corporation 62.46% 9.08% 5.56%
Golub Capital BDC 56.80% 8.70% 4.43%

Dividends

Fidus Investment Corporation pays an annual dividend of $1.56 per share and has a dividend yield of 9.8%. Golub Capital BDC pays an annual dividend of $1.28 per share and has a dividend yield of 7.0%. Fidus Investment Corporation pays out 80.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Golub Capital BDC pays out 96.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Fidus Investment Corporation is clearly the better dividend stock, given its higher yield and lower payout ratio.

Analyst Ratings

This is a summary of recent recommendations and price targets for Fidus Investment Corporation and Golub Capital BDC, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Fidus Investment Corporation 0 2 1 0 2.33
Golub Capital BDC 0 4 0 0 2.00

Fidus Investment Corporation presently has a consensus target price of $17.33, suggesting a potential upside of 8.81%. Golub Capital BDC has a consensus target price of $19.00, suggesting a potential upside of 4.05%. Given Fidus Investment Corporation’s stronger consensus rating and higher probable upside, equities analysts clearly believe Fidus Investment Corporation is more favorable than Golub Capital BDC.

Insider & Institutional Ownership

30.7% of Fidus Investment Corporation shares are held by institutional investors. Comparatively, 41.6% of Golub Capital BDC shares are held by institutional investors. 1.3% of Fidus Investment Corporation shares are held by company insiders. Comparatively, 2.4% of Golub Capital BDC shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock is poised for long-term growth.

Risk & Volatility

Fidus Investment Corporation has a beta of 1.12, suggesting that its share price is 12% more volatile than the S&P 500. Comparatively, Golub Capital BDC has a beta of 0.69, suggesting that its share price is 31% less volatile than the S&P 500.

Valuation and Earnings

This table compares Fidus Investment Corporation and Golub Capital BDC’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Fidus Investment Corporation N/A N/A N/A $1.93 8.25
Golub Capital BDC N/A N/A N/A $1.33 13.73

Fidus Investment Corporation is trading at a lower price-to-earnings ratio than Golub Capital BDC, indicating that it is currently the more affordable of the two stocks.

Summary

Fidus Investment Corporation beats Golub Capital BDC on 10 of the 12 factors compared between the two stocks.

Fidus Investment Corporation Company Profile

Fidus Investment Corporation is a closed-end, non-diversified investment company. The Company provides customized debt and equity financing solutions to lower middle-market companies. The Company’s investment objective is to provide attractive risk-adjusted returns by generating both current income from its debt investments and capital appreciation from its equity-related investments. The Company typically invests in mezzanine debt, which includes senior subordinated notes and junior secured loans. The Company structures some of its debt investments as senior secured or unitranche loans. The Company’s equity securities typically consist of either a direct minority equity investment in common or preferred stock or membership/partnership interests of a portfolio company, or it may receive warrants to buy a minority equity interest in a portfolio company in connection with a debt investment. Its investment activities are managed by Fidus Investment Advisors, LLC, its investment advisor.

Golub Capital BDC Company Profile

Golub Capital BDC, Inc. is an externally managed, non-diversified, closed-end, management investment company. The Company’s investment objective is to generate current income and capital appreciation by investing primarily in senior secured and one stop loans of the United States middle-market companies. It may also selectively invest in second lien and subordinated loans of, and warrants and minority equity securities in the United States middle-market companies. The Company seeks to create a portfolio that includes primarily senior secured and one stop loans by primarily investing in the securities of the United States middle-market companies. It generally invests in securities that have been rated below investment grade by independent rating agencies or that would be rated below investment grade if they were rated. The Company’s investment activities are managed by its investment advisor, GC Advisors LLC (GC Advisors).

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