Gladstone Investment (NASDAQ:GAIN – Get Free Report) and Franklin Resources (NYSE:BEN – Get Free Report) are both finance companies, but which is the better investment? We will contrast the two businesses based on the strength of their institutional ownership, profitability, earnings, valuation, risk, dividends and analyst recommendations.
Profitability
This table compares Gladstone Investment and Franklin Resources’ net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Gladstone Investment | 158.95% | 5.90% | 2.88% |
| Franklin Resources | 8.72% | 11.55% | 4.46% |
Institutional & Insider Ownership
11.8% of Gladstone Investment shares are owned by institutional investors. Comparatively, 47.6% of Franklin Resources shares are owned by institutional investors. 2.2% of Gladstone Investment shares are owned by company insiders. Comparatively, 23.4% of Franklin Resources shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.
Analyst Recommendations
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Gladstone Investment | 0 | 1 | 3 | 0 | 2.75 |
| Franklin Resources | 1 | 6 | 4 | 0 | 2.27 |
Gladstone Investment presently has a consensus target price of $16.75, indicating a potential upside of 10.63%. Franklin Resources has a consensus target price of $35.89, indicating a potential upside of 17.50%. Given Franklin Resources’ higher possible upside, analysts plainly believe Franklin Resources is more favorable than Gladstone Investment.
Dividends
Gladstone Investment pays an annual dividend of $0.96 per share and has a dividend yield of 6.3%. Franklin Resources pays an annual dividend of $1.32 per share and has a dividend yield of 4.3%. Gladstone Investment pays out 23.0% of its earnings in the form of a dividend. Franklin Resources pays out 89.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Franklin Resources has raised its dividend for 45 consecutive years. Gladstone Investment is clearly the better dividend stock, given its higher yield and lower payout ratio.
Earnings and Valuation
This table compares Gladstone Investment and Franklin Resources”s top-line revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Gladstone Investment | $99.08 million | 6.08 | $184.75 million | $4.18 | 3.62 |
| Franklin Resources | $9.32 billion | 1.66 | $524.90 million | $1.47 | 20.78 |
Franklin Resources has higher revenue and earnings than Gladstone Investment. Gladstone Investment is trading at a lower price-to-earnings ratio than Franklin Resources, indicating that it is currently the more affordable of the two stocks.
Risk & Volatility
Gladstone Investment has a beta of 0.76, indicating that its stock price is 24% less volatile than the S&P 500. Comparatively, Franklin Resources has a beta of 1.54, indicating that its stock price is 54% more volatile than the S&P 500.
Summary
Franklin Resources beats Gladstone Investment on 11 of the 17 factors compared between the two stocks.
About Gladstone Investment
Gladstone Investment Corporation is business development company, specializes in lower middle market, mature stage, buyouts; refinancing existing debt; senior debt securities such as senior loans, senior term loans, lines of credit, and senior notes; senior subordinated debt securities such as senior subordinated loans and senior subordinated notes; junior subordinated debt securities such as subordinated notes and mezzanine loans; limited liability company interests, and warrants or options. The fund does not invest in start-ups. The fund seeks to invest in manufacturing, consumer products and business/consumer services sector. It seeks to invest in small and mid-sized companies based in the United States. The fund prefers to make debt investments between $5 million and $30 million and equity investments between $10 million and $40 million in companies. The fund seeks to invest in companies with revenue between $20 million and $100 million. The fund invests in companies with EBITDA from $3 million to $20 million. It seeks minority equity ownership and prefers to hold a board seat in its portfolio companies. It also prefers to take majority stake in its portfolio companies. The fund typically holds the investments for seven years and exits via sale or recapitalization, initial public offering, or sale to third party.
About Franklin Resources
Franklin Resources, Inc. is a publicly owned asset management holding company. Through its subsidiaries, the firm provides its services to individuals, institutions, pension plans, trusts, and partnerships. It launches equity, fixed income, balanced, and multi-asset mutual funds through its subsidiaries. The firm invests in the public equity, fixed income, and alternative markets. Franklin Resources, Inc. was founded in 1947 and is based in San Mateo, California with an additional office in Calgary, Canada; Dubai, United Arab Emirates; Edinburgh, United Kingdom; Fort Lauderdale, United States; Hyderabad, India; London, United Kingdom; Rancho Cordova, United states; Shanghai, China; Singapore; Stamford, United States; and Vienna, Austria.
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