Contrasting Gladstone Capital (NASDAQ:GLAD) & Trinity Capital (NASDAQ:TRIN)

Trinity Capital (NASDAQ:TRIN) and Gladstone Capital (NASDAQ:GLAD) 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 Trinity Capital and Gladstone Capital, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Trinity Capital	1	1	2	0	2.25
Gladstone Capital	1	3	1	0	2.00

Trinity Capital presently has a consensus price target of $15.63, indicating a potential upside of 6.08%. Gladstone Capital has a consensus price target of $24.50, indicating a potential upside of 28.21%. Given Gladstone Capital’s higher possible upside, analysts plainly believe Gladstone Capital is more favorable than Trinity Capital.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Trinity Capital	51.88%	15.72%	7.08%
Gladstone Capital	84.60%	9.43%	5.64%

Institutional & Insider Ownership

24.6% of Trinity Capital shares are owned by institutional investors. Comparatively, 10.7% of Gladstone Capital shares are owned by institutional investors. 6.4% of Trinity Capital shares are owned by company insiders. Comparatively, 4.0% of Gladstone Capital 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

Trinity Capital pays an annual dividend of $2.04 per share and has a dividend yield of 13.8%. Gladstone Capital pays an annual dividend of $1.80 per share and has a dividend yield of 9.4%. Trinity Capital pays out 91.5% 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 pays out 53.1% of its earnings in the form of a dividend. Trinity Capital has raised its dividend for 1 consecutive years and Gladstone Capital has raised its dividend for 4 consecutive years.

Valuation & Earnings

This table compares Trinity Capital and Gladstone Capital”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Trinity Capital	$237.69 million	4.36	$115.60 million	$2.23	6.61
Gladstone Capital	$76.10 million	5.61	$94.72 million	$3.39	5.64

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

Risk and Volatility

Trinity Capital has a beta of 0.53, meaning that its stock price is 47% less volatile than the S&P 500. Comparatively, Gladstone Capital has a beta of 0.99, meaning that its stock price is 1% less volatile than the S&P 500.

Summary

Trinity Capital beats Gladstone Capital on 10 of the 17 factors compared between the two stocks.

About Trinity Capital

Trinity Capital Inc. is a business development company. It is a venture capital firm specializing in venture debt to growth stage companies looking for loans and/or equipment financing. Trinity Capital Inc. was founded in 2019 is based in Phoenix, Arizona with additional offices in the United States.

About Gladstone Capital

Gladstone Capital Corporation is a business development company specializing in lower middle market, growth capital, add on acquisitions, change of control, buy & build strategies, debt refinancing, debt investments in senior term loans, revolving loans, secured first and second lien term loans, senior subordinated loans, unitranche loans, junior subordinated loans, and mezzanine loans and equity investments in the form of common stock, preferred stock, limited liability company interests, or warrants. It operates as a business development company. The fund also makes private equity investments in acquisitions, buyouts and recapitalizations, and refinancing existing debts. It targets small and medium-sized companies in United States. It is industry agnostic and seeks to invest in companies engaged in the business services, light and specialty manufacturing, niche industrial products and services, specialty consumer products and services, energy services, transportation and logistics, healthcare and education services, specialty chemicals, media and communications and aerospace and defense. The fund seeks to invest between $7 million and $30 million in companies that have between $20 million and $150 million in sales and EBITDA between $3 million and $25 million. It prefers to acquire minority stakes. It seeks to exit its investments through strategic acquisitions by other industry participants or financial buyers, initial public offerings of common stock, or other capital market transactions.