Comparing Gladstone Investment (NASDAQ:GAIN) & Medallion Financial (NASDAQ:MFIN)

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

Institutional and Insider Ownership

40.6% of Medallion Financial shares are held by institutional investors. Comparatively, 11.9% of Gladstone Investment shares are held by institutional investors. 24.6% of Medallion Financial 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 large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Dividends

Medallion Financial pays an annual dividend of $0.48 per share and has a dividend yield of 4.6%. Gladstone Investment pays an annual dividend of $0.96 per share and has a dividend yield of 6.9%. Medallion Financial pays out 28.1% of its earnings in the form of a dividend. Gladstone Investment pays out 30.9% 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.

Analyst Ratings

This is a summary of recent ratings and price targets for Medallion Financial and Gladstone Investment, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Medallion Financial	0	2	1	0	2.33
Gladstone Investment	1	3	1	0	2.00

Medallion Financial currently has a consensus target price of $12.00, indicating a potential upside of 16.17%. Given Medallion Financial’s stronger consensus rating and higher probable upside, equities research analysts plainly believe Medallion Financial is more favorable than Gladstone Investment.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Medallion Financial	12.12%	9.28%	1.55%
Gladstone Investment	118.55%	6.77%	3.22%

Valuation and Earnings

This table compares Medallion Financial and Gladstone Investment”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Medallion Financial	$302.03 million	0.80	$35.88 million	$1.71	6.04
Gladstone Investment	$93.66 million	5.94	$65.32 million	$3.11	4.49

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

Volatility & Risk

Medallion Financial has a beta of 0.77, indicating that its share price is 23% less volatile than the S&P 500. Comparatively, Gladstone Investment has a beta of 0.84, indicating that its share price is 16% less volatile than the S&P 500.

Summary

Medallion Financial beats Gladstone Investment on 8 of the 15 factors compared between the two stocks.

About Medallion Financial

Medallion Financial Corp., together with its subsidiaries, operates as a specialty finance company in the United States. It operates in four segments: Recreation Lending, Home Improvement Lending, Commercial Lending, and Taxi Medallion Lending. The company offers loans that finance consumer purchases of recreational vehicles, boats, and other consumer recreational equipment; consumer financing for window, siding, and roof replacement, swimming pool installations, and other home improvement projects; senior and subordinated loans for the purchase of equipment and related assets necessary to open a new business, or purchase or improvement of an existing business; and taxi medallion loans to individuals and small to mid-size businesses. It also provides debt, mezzanine, and equity investment capital to companies in various commercial industries; and raises deposits and conducts other banking activities. Medallion Financial Corp. was incorporated in 1995 and is headquartered in New York City, New York.

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.