Gladstone Capital Corporation (GLAD) vs. PennantPark Floating Rate Capital (PFLT) Critical Review
Gladstone Capital Corporation (NASDAQ: GLAD) and PennantPark Floating Rate Capital (NASDAQ:PFLT) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their dividends, profitability, valuation, analyst recommendations, earnings, risk and institutional ownership.
This table compares Gladstone Capital Corporation and PennantPark Floating Rate Capital’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Gladstone Capital Corporation||85.01%||9.88%||6.26%|
|PennantPark Floating Rate Capital||73.28%||7.26%||4.15%|
This is a summary of recent ratings for Gladstone Capital Corporation and PennantPark Floating Rate Capital, as reported by MarketBeat.com.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Gladstone Capital Corporation||1||3||1||0||2.00|
|PennantPark Floating Rate Capital||0||1||4||0||2.80|
Given PennantPark Floating Rate Capital’s stronger consensus rating and higher probable upside, analysts clearly believe PennantPark Floating Rate Capital is more favorable than Gladstone Capital Corporation.
Risk and Volatility
Gladstone Capital Corporation has a beta of 1.23, indicating that its share price is 23% more volatile than the S&P 500. Comparatively, PennantPark Floating Rate Capital has a beta of 0.6, indicating that its share price is 40% less volatile than the S&P 500.
Valuation and Earnings
This table compares Gladstone Capital Corporation and PennantPark Floating Rate Capital’s gross revenue, earnings per share (EPS) and valuation.
|Gross Revenue||Price/Sales Ratio||NetIncome||Earnings Per Share||Price/Earnings Ratio|
|Gladstone Capital Corporation||$39.11||6.52||$11.36||$1.35||7.23|
|PennantPark Floating Rate Capital||$46.30||0.00||$33.49||$1.46||N/A|
PennantPark Floating Rate Capital has higher revenue and earnings than Gladstone Capital Corporation. PennantPark Floating Rate Capital is trading at a lower price-to-earnings ratio than Gladstone Capital Corporation, indicating that it is currently the more affordable of the two stocks.
Gladstone Capital Corporation pays an annual dividend of $0.84 per share and has a dividend yield of 8.6%. PennantPark Floating Rate Capital pays an annual dividend of $1.14 per share. Gladstone Capital Corporation pays out 62.2% of its earnings in the form of a dividend. PennantPark Floating Rate Capital pays out 78.1% 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 is clearly the better dividend stock, given its higher yield and lower payout ratio.
Insider & Institutional Ownership
14.4% of Gladstone Capital Corporation shares are held by institutional investors. Comparatively, 30.4% of PennantPark Floating Rate Capital shares are held by institutional investors. 6.5% of Gladstone Capital Corporation shares are held by insiders. Comparatively, 1.2% of PennantPark Floating Rate Capital shares are held by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.
PennantPark Floating Rate Capital beats Gladstone Capital Corporation on 8 of the 15 factors compared between the two stocks.
Gladstone Capital Corporation Company Profile
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.
PennantPark Floating Rate Capital Company Profile
PennantPark Floating Rate Capital Ltd. is a business development company. The Company is a closed-end, externally managed and non-diversified investment company. Its investment objectives are to generate current income and capital appreciation by investing primarily in floating rate loans and other investments made to the United States middle-market companies. It provides first lien secured debt and other opportunistic financings (senior notes, second lien, mezzanine, private high yield debt, and preferred and common stock) to middle market sponsors and companies. Its investments may include equity features, such as direct investments in the equity securities of borrowers or warrants or options to buy a minority interest in a portfolio company. It has investments in various sectors, including aerospace and defense; consumer services; healthcare and pharmaceuticals, and others. Its investment activities are managed by the investment advisor, PennantPark Investment Advisers, LLC.
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