Contrasting Gladstone Capital (GLAD) & Harvest Capital Credit (HCAP)

Gladstone Capital (NASDAQ: GLAD) and Harvest Capital Credit (NASDAQ:HCAP) are both small-cap finance companies, but which is the better stock? We will compare the two businesses based on the strength of their earnings, valuation, profitability, analyst recommendations, institutional ownership, risk and dividends.

Analyst Ratings

This is a breakdown of recent recommendations for Gladstone Capital and Harvest Capital Credit, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Gladstone Capital 1 3 1 0 2.00
Harvest Capital Credit 0 1 0 0 2.00

Gladstone Capital presently has a consensus price target of $9.16, indicating a potential upside of 7.42%. Harvest Capital Credit has a consensus price target of $13.50, indicating a potential upside of 18.73%. Given Harvest Capital Credit’s higher possible upside, analysts plainly believe Harvest Capital Credit is more favorable than Gladstone Capital.

Profitability

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

Net Margins Return on Equity Return on Assets
Gladstone Capital 43.78% 9.94% 6.30%
Harvest Capital Credit 14.76% 11.04% 6.80%

Institutional & Insider Ownership

14.3% of Gladstone Capital shares are owned by institutional investors. Comparatively, 5.7% of Harvest Capital Credit shares are owned by institutional investors. 5.9% of Gladstone Capital shares are owned by company insiders. Comparatively, 9.5% of Harvest Capital Credit shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Dividends

Gladstone Capital pays an annual dividend of $0.84 per share and has a dividend yield of 9.8%. Harvest Capital Credit pays an annual dividend of $1.35 per share and has a dividend yield of 11.9%. Gladstone Capital pays out 125.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Harvest Capital Credit pays out 287.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Valuation & Earnings

This table compares Gladstone Capital and Harvest Capital Credit’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Gladstone Capital $39.23 million 5.79 $17.18 million $0.67 12.73
Harvest Capital Credit $20.89 million 3.53 $6.00 million $0.47 24.19

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

Risk and Volatility

Gladstone Capital has a beta of 1.1, meaning that its stock price is 10% more volatile than the S&P 500. Comparatively, Harvest Capital Credit has a beta of 0.7, meaning that its stock price is 30% less volatile than the S&P 500.

Summary

Gladstone Capital beats Harvest Capital Credit on 9 of the 15 factors compared between the two stocks.

Gladstone Capital 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.

Harvest Capital Credit Company Profile

Harvest Capital Credit Corporation is an externally managed, closed-end, non-diversified management investment company. The Company operates as a business development company and provides customized financing solutions for small to mid-sized companies. Its investment objective is to generate both current income and capital appreciation by making direct investments in the form of subordinated debt, senior debt, and to a lesser extent, minority equity investments in privately-held the United States small to mid-sized companies. Its investment portfolio includes over 56.8% of senior secured term loans, 40.8% of junior secured term loans, 1.3% of equity investments and 1.1% of collateralized loan obligation (CLO) equity at fair value. It may also invest in other investments, such as loans to larger, publicly-traded companies, high-yield bonds and distressed debt securities. It may also invest in debt and equity securities issued by CLO funds. HCAP Advisors LLC is its investment adviser.

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