Stellus Capital Investment (NYSE:SCM) & Goldman Sachs BDC (NYSE:GSBD) Head to Head Review

Stellus Capital Investment (NYSE:SCM) and Goldman Sachs BDC (NYSE:GSBD) are both small-cap finance companies, but which is the better investment? We will contrast the two companies based on the strength of their risk, analyst recommendations, dividends, valuation, profitability, earnings and institutional ownership.

Profitability

This table compares Stellus Capital Investment and Goldman Sachs BDC’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Stellus Capital Investment	38.24%	11.06%	4.12%
Goldman Sachs BDC	36.17%	13.95%	6.17%

Analyst Recommendations

This is a summary of recent ratings for Stellus Capital Investment and Goldman Sachs BDC, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Stellus Capital Investment	0	1	0	0	2.00
Goldman Sachs BDC	1	0	0	0	1.00

Stellus Capital Investment presently has a consensus price target of $13.00, indicating a potential downside of 10.57%. Goldman Sachs BDC has a consensus price target of $10.00, indicating a potential downside of 10.31%. Given Goldman Sachs BDC’s higher possible upside, analysts plainly believe Goldman Sachs BDC is more favorable than Stellus Capital Investment.

Risk & Volatility

Stellus Capital Investment has a beta of 0.86, suggesting that its stock price is 14% less volatile than the S&P 500. Comparatively, Goldman Sachs BDC has a beta of 0.75, suggesting that its stock price is 25% less volatile than the S&P 500.

Dividends

Stellus Capital Investment pays an annual dividend of $1.60 per share and has a dividend yield of 11.0%. Goldman Sachs BDC pays an annual dividend of $1.28 per share and has a dividend yield of 11.5%. Stellus Capital Investment pays out 110.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Goldman Sachs BDC pays out 101.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Goldman Sachs BDC is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider & Institutional Ownership

13.2% of Stellus Capital Investment shares are owned by institutional investors. Comparatively, 28.7% of Goldman Sachs BDC shares are owned by institutional investors. 4.0% of Stellus Capital Investment shares are owned by company insiders. Comparatively, 0.1% of Goldman Sachs BDC shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Valuation and Earnings

This table compares Stellus Capital Investment and Goldman Sachs BDC”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Stellus Capital Investment	$104.74 million	3.94	$45.85 million	$1.45	10.03
Goldman Sachs BDC	$434.37 million	2.93	$62.87 million	$1.26	8.85

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

Summary

Goldman Sachs BDC beats Stellus Capital Investment on 8 of the 15 factors compared between the two stocks.

About Stellus Capital Investment

Stellus Capital Investment Corporation is a business development company specializing in investments in private middle-market companies. It invests through first lien, second lien, unitranche, and mezzanine debt financing, often with a corresponding equity investment. The fund prefers to invest in US and Canada. The fund seeks to invest in companies with an EBITDA between $5 million and $50 million.

About Goldman Sachs BDC

Goldman Sachs BDC, Inc. is a business development company specializing in middle market and mezzanine investment in private companies. It seeks to make capital appreciation through direct originations of secured debt, senior secured debt, junior secured debt, including first lien, first lien/last-out unitranche and second lien debt, unsecured debt, including mezzanine debt and, to a lesser extent, investments in equities. The fund primarily invests in United States. It seeks to invest between $10 million and $75 million in companies with EBITDA between $5 million and $75 million annually.