Reviewing BARINGS BDC (NYSE:BBDC) & Gladstone Investment (NASDAQ:GAIN)

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

Earnings and Valuation

This table compares BARINGS BDC and Gladstone Investment”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
BARINGS BDC	$286.17 million	3.47	$110.29 million	$0.96	9.84
Gladstone Investment	$74.11 million	7.37	$65.32 million	$2.17	6.59

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

Risk and Volatility

BARINGS BDC has a beta of 0.73, meaning that its stock price is 27% less volatile than the S&P 500. Comparatively, Gladstone Investment has a beta of 0.94, meaning that its stock price is 6% less volatile than the S&P 500.

Analyst Recommendations

This is a summary of current ratings for BARINGS BDC and Gladstone Investment, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
BARINGS BDC	0	1	2	0	2.67
Gladstone Investment	0	3	0	0	2.00

BARINGS BDC currently has a consensus target price of $9.67, suggesting a potential upside of 2.29%. Gladstone Investment has a consensus target price of $13.50, suggesting a potential downside of 5.59%. Given BARINGS BDC’s stronger consensus rating and higher possible upside, equities research analysts clearly believe BARINGS BDC is more favorable than Gladstone Investment.

Insider and Institutional Ownership

44.1% of BARINGS BDC shares are held by institutional investors. Comparatively, 11.9% of Gladstone Investment shares are held by institutional investors. 0.5% of BARINGS BDC shares are held by company insiders. Comparatively, 2.4% of Gladstone Investment shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Profitability

This table compares BARINGS BDC and Gladstone Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
BARINGS BDC	35.67%	9.76%	4.26%
Gladstone Investment	83.78%	7.33%	3.53%

Dividends

BARINGS BDC pays an annual dividend of $1.04 per share and has a dividend yield of 11.0%. Gladstone Investment pays an annual dividend of $0.96 per share and has a dividend yield of 6.7%. BARINGS BDC pays out 108.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Gladstone Investment pays out 44.2% of its earnings in the form of a dividend. BARINGS BDC has increased its dividend for 3 consecutive years. BARINGS BDC is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

BARINGS BDC beats Gladstone Investment on 11 of the 17 factors compared between the two stocks.

About BARINGS BDC

Barings BDC, Inc. is a publicly traded, externally managed investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. It seeks to invest primarily in senior secured loans, first lien debt, unitranche, second lien debt, subordinated debt, equity co-investments and senior secured private debt investments in private middle-market companies that operate across a wide range of industries. It specializes in mezzanine, leveraged buyouts, management buyouts, ESOPs, change of control transactions, acquisition financings, growth financing, and recapitalizations in lower middle market, mature, and later stage companies. It invests in manufacturing and distribution; business services and technology; transportation and logistics; consumer product and services. It invests in United States. It invests in companies with EBITDA of $10 million to $75 million, typically in private equity sponsor backed.

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.