Head-To-Head Contrast: Horizon Technology Finance (NASDAQ:HRZN) and Gladstone Investment (NASDAQ:GAIN)

Horizon Technology Finance (NASDAQ:HRZN) and Gladstone Investment (NASDAQ:GAIN) are both small-cap finance companies, but which is the superior stock? We will compare the two businesses based on the strength of their risk, earnings, analyst recommendations, institutional ownership, profitability, dividends and valuation.

Earnings and Valuation

This table compares Horizon Technology Finance and Gladstone Investment”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Horizon Technology Finance	$99.92 million	3.06	-$5.63 million	($1.15)	-6.24
Gladstone Investment	$93.66 million	5.72	$65.32 million	$1.78	8.16

Gladstone Investment has lower revenue, but higher earnings than Horizon Technology Finance. Horizon Technology Finance is trading at a lower price-to-earnings ratio than Gladstone Investment, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of recent recommendations for Horizon Technology Finance and Gladstone Investment, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Horizon Technology Finance	2	2	1	0	1.80
Gladstone Investment	0	3	0	0	2.00

Horizon Technology Finance presently has a consensus target price of $7.30, indicating a potential upside of 1.67%. Gladstone Investment has a consensus target price of $13.50, indicating a potential downside of 7.09%. Given Horizon Technology Finance’s higher probable upside, analysts clearly believe Horizon Technology Finance is more favorable than Gladstone Investment.

Risk & Volatility

Horizon Technology Finance has a beta of 0.99, indicating that its stock price is 1% less volatile than the S&P 500. Comparatively, Gladstone Investment has a beta of 0.92, indicating that its stock price is 8% less volatile than the S&P 500.

Dividends

Horizon Technology Finance pays an annual dividend of $1.32 per share and has a dividend yield of 18.4%. Gladstone Investment pays an annual dividend of $0.96 per share and has a dividend yield of 6.6%. Horizon Technology Finance pays out -114.8% of its earnings in the form of a dividend. Gladstone Investment pays out 53.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Horizon Technology Finance is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Horizon Technology Finance and Gladstone Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Horizon Technology Finance	-48.76%	14.02%	5.68%
Gladstone Investment	83.78%	7.34%	3.59%

Institutional & Insider Ownership

4.9% of Horizon Technology Finance shares are owned by institutional investors. Comparatively, 11.9% of Gladstone Investment shares are owned by institutional investors. 1.3% of Horizon Technology Finance shares are owned by company insiders. Comparatively, 2.4% of Gladstone Investment shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.

About Horizon Technology Finance

Horizon Technology Finance Corporation is a business development company specializing in lending and and investing in development-stage investments. It focuses on making secured debt and venture lending investments to venture capital backed companies in the technology, life science, healthcare information and services, cleantech and sustainability industries. It seeks to invest in companies in the United States.

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.