Financial Review: Gladstone Capital (NASDAQ:GLAD) versus Chicago Atlantic BDC (NASDAQ:LIEN)

Chicago Atlantic BDC (NASDAQ:LIEN) and Gladstone Capital (NASDAQ:GLAD) are both small-cap finance companies, but which is the superior business? We will contrast the two companies based on the strength of their earnings, analyst recommendations, risk, valuation, institutional ownership, profitability and dividends.

Institutional and Insider Ownership

4.4% of Chicago Atlantic BDC shares are owned by institutional investors. Comparatively, 10.7% of Gladstone Capital shares are owned by institutional investors. 16.9% of Chicago Atlantic BDC shares are owned by insiders. Comparatively, 4.0% of Gladstone Capital 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.

Risk & Volatility

Chicago Atlantic BDC has a beta of 0.26, indicating that its share price is 74% less volatile than the S&P 500. Comparatively, Gladstone Capital has a beta of 0.93, indicating that its share price is 7% less volatile than the S&P 500.

Profitability

This table compares Chicago Atlantic BDC and Gladstone Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Chicago Atlantic BDC	33.72%	5.80%	5.46%
Gladstone Capital	64.36%	9.48%	5.53%

Earnings & Valuation

This table compares Chicago Atlantic BDC and Gladstone Capital”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Chicago Atlantic BDC	$39.86 million	6.26	$9.62 million	$0.79	13.84
Gladstone Capital	$89.12 million	5.44	$58.11 million	$2.56	8.38

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

Analyst Recommendations

This is a summary of recent ratings for Chicago Atlantic BDC and Gladstone Capital, as reported by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Chicago Atlantic BDC	0	3	0	0	2.00
Gladstone Capital	0	3	2	0	2.40

Gladstone Capital has a consensus price target of $22.00, indicating a potential upside of 2.56%. Given Gladstone Capital’s stronger consensus rating and higher probable upside, analysts clearly believe Gladstone Capital is more favorable than Chicago Atlantic BDC.

Dividends

Chicago Atlantic BDC pays an annual dividend of $1.36 per share and has a dividend yield of 12.4%. Gladstone Capital pays an annual dividend of $1.80 per share and has a dividend yield of 8.4%. Chicago Atlantic BDC pays out 172.2% 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 Capital pays out 70.3% of its earnings in the form of a dividend. Gladstone Capital has raised its dividend for 4 consecutive years.

Summary

Gladstone Capital beats Chicago Atlantic BDC on 13 of the 17 factors compared between the two stocks.

About Chicago Atlantic BDC

Chicago Atlantic BDC Inc. is a specialty finance company which has elected to be regulated as a business development company. Its investment objective is to maximize risk-adjusted returns on equity for its stockholders by investing primarily in direct loans to privately held middle-market companies, with a primary focus on cannabis companies. Chicago Atlantic BDC Inc., formerly known as CHICAGO ATLNTIC, is based in NEW YORK.

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.