Gladstone Capital (NASDAQ:GLAD) versus CION Investment (NYSE:CION) Critical Review

Gladstone Capital (NASDAQ:GLAD) and CION Investment (NYSE:CION) are both small-cap finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their analyst recommendations, earnings, dividends, profitability, institutional ownership, risk and valuation.

Risk & Volatility

Gladstone Capital has a beta of 1.02, suggesting that its share price is 2% more volatile than the S&P 500. Comparatively, CION Investment has a beta of 1.12, suggesting that its share price is 12% more volatile than the S&P 500.

Earnings and Valuation

This table compares Gladstone Capital and CION Investment”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Gladstone Capital	$96.62 million	5.46	$94.72 million	$3.39	6.97
CION Investment	$252.43 million	2.09	$33.90 million	($0.19)	-53.24

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Gladstone Capital	84.60%	9.43%	5.64%
CION Investment	-4.57%	9.63%	4.00%

Insider and Institutional Ownership

10.7% of Gladstone Capital shares are owned by institutional investors. Comparatively, 32.0% of CION Investment shares are owned by institutional investors. 4.0% of Gladstone Capital shares are owned by insiders. Comparatively, 0.6% of CION Investment shares are owned by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Analyst Ratings

This is a breakdown of current ratings and recommmendations for Gladstone Capital and CION Investment, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Gladstone Capital	0	3	0	0	2.00
CION Investment	1	1	0	1	2.33

Gladstone Capital presently has a consensus target price of $24.50, indicating a potential upside of 3.73%. CION Investment has a consensus target price of $10.75, indicating a potential upside of 6.28%. Given CION Investment’s stronger consensus rating and higher possible upside, analysts clearly believe CION Investment is more favorable than Gladstone Capital.

Dividends

Gladstone Capital pays an annual dividend of $1.98 per share and has a dividend yield of 8.4%. CION Investment pays an annual dividend of $1.44 per share and has a dividend yield of 14.2%. Gladstone Capital pays out 58.4% of its earnings in the form of a dividend. CION Investment pays out -757.9% 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. Gladstone Capital has increased its dividend for 4 consecutive years and CION Investment has increased its dividend for 1 consecutive years. CION Investment is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

CION Investment beats Gladstone Capital on 9 of the 17 factors compared between the two stocks.

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.

About CION Investment

CION Investment Corporation is a business development company. It specializes in investments in senior secured loans, including unitranche loans, First Lien, second lien loans, long-term subordinated loans, and mezzanine loans; equity interests such as warrants or options; and corporate bonds; and other debt securities in middle-market companies. The firm invests in growth capital, acquisitions, leveraged buyouts, market/product expansion, refinancing and recapitalization. The fund also invests up to 30 percent of their assets opportunistically in other types of investments, including the securities of larger public companies and foreign securities. It also makes investments in the secondary loan market. The fund does not invest in start-up companies, turnaround situations, or companies with speculative business plans. The fund prefers to invest in high tech industries, healthcare, pharmaceuticals, business services, media, chemicals, plastic, rubber, telecommunication, consumer services, advertising, printing and publishing, consumer goods, durables, diversified financials, and other industries. It also invests in homebuilding, restaurants, beverage and tobacco bars, broadcasting, distributors, Non-durable good distribution, food beverage and tobacco, energy, oil gas and consumables fuels, insurance, aerospace and defense, industrial machinery, paper and forest product machinery, information technology, metals and mining, and real estate. It primarily seeks to invest in the United States. The fund seeks to invest between $5 million and $50 million in companies with an EBITDA between $25 million and $75 million with average targeted hold of $25 million. It also purchases minority interests in the form of common or preferred equity in the target companies, typically in conjunction with its debt investments or through a co-investment with a financial sponsor. The fund seeks to exit its investments through an initial public offering of common stock, a merger, a sale, or other recapitalization.