Eagle Point Credit (ECC) & Golub Capital BDC (GBDC) Critical Review

Eagle Point Credit (NYSE: ECC) and Golub Capital BDC (NASDAQ:GBDC) are both small-cap financials companies, but which is the better business? We will compare the two companies based on the strength of their dividends, analyst recommendations, profitability, earnings, risk, institutional ownership and valuation.

Dividends

Eagle Point Credit pays an annual dividend of $2.40 per share and has a dividend yield of 12.9%. Golub Capital BDC pays an annual dividend of $1.28 per share and has a dividend yield of 6.8%. Golub Capital BDC pays out 88.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Risk & Volatility

Eagle Point Credit has a beta of 0.3, meaning that its share price is 70% less volatile than the S&P 500. Comparatively, Golub Capital BDC has a beta of 0.67, meaning that its share price is 33% less volatile than the S&P 500.

Valuation and Earnings

This table compares Eagle Point Credit and Golub Capital BDC’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Eagle Point Credit $55.84 million 6.16 $90.58 million N/A N/A
Golub Capital BDC $137.76 million 8.17 $82.28 million $1.45 13.03

Eagle Point Credit has higher earnings, but lower revenue than Golub Capital BDC.

Profitability

This table compares Eagle Point Credit and Golub Capital BDC’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Eagle Point Credit 65.86% 10.73% 7.07%
Golub Capital BDC 58.06% 7.90% 4.06%

Insider and Institutional Ownership

56.9% of Eagle Point Credit shares are held by institutional investors. Comparatively, 40.8% of Golub Capital BDC shares are held by institutional investors. 0.6% of Eagle Point Credit 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 endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Analyst Ratings

This is a summary of recent ratings and target prices for Eagle Point Credit and Golub Capital BDC, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Eagle Point Credit 0 0 4 0 3.00
Golub Capital BDC 0 3 0 0 2.00

Eagle Point Credit currently has a consensus price target of $21.13, suggesting a potential upside of 13.51%. Golub Capital BDC has a consensus price target of $19.50, suggesting a potential upside of 3.17%. Given Eagle Point Credit’s stronger consensus rating and higher possible upside, equities research analysts clearly believe Eagle Point Credit is more favorable than Golub Capital BDC.

Summary

Eagle Point Credit beats Golub Capital BDC on 10 of the 15 factors compared between the two stocks.

Eagle Point Credit Company Profile

Eagle Point Credit Company Inc. is a non-diversified, closed-end management investment company. The Company’s primary investment objective is to generate high current income, with a secondary objective to generate capital appreciation. The Company primarily invests in equity and junior debt tranches of collateralized loan obligations (CLOs) that are collateralized by a portfolio consisting primarily of the below investment grade United States senior secured loans. It may also invest in other securities and instruments related to these investments. The Company’s portfolio includes its investments in various industries, such as business equipment and services; healthcare; electronics/electrical; leisure goods/activities/movies; retailers (except food and drug); chemicals and plastics; telecommunications; financial intermediaries, and utilities. The Company’s advisor is Eagle Point Credit Management LLC.

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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