Gladstone Investment (NASDAQ:GAIN) and Kayne Anderson BDC (NYSE:KBDC) Financial Analysis

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

Dividends

Kayne Anderson BDC pays an annual dividend of $1.60 per share and has a dividend yield of 11.9%. Gladstone Investment pays an annual dividend of $0.96 per share and has a dividend yield of 6.0%. Kayne Anderson BDC pays out 125.0% 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 20.5% of its earnings in the form of a dividend.

Risk and Volatility

Kayne Anderson BDC has a beta of 0.3, suggesting that its share price is 70% less volatile than the S&P 500. Comparatively, Gladstone Investment has a beta of 0.78, suggesting that its share price is 22% less volatile than the S&P 500.

Institutional & Insider Ownership

11.8% of Gladstone Investment shares are held by institutional investors. 2.9% of Kayne Anderson BDC shares are held by insiders. Comparatively, 2.2% of Gladstone Investment shares are held by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Kayne Anderson BDC	37.30%	10.47%	5.14%
Gladstone Investment	186.47%	6.05%	2.90%

Analyst Recommendations

This is a breakdown of current ratings for Kayne Anderson BDC and Gladstone Investment, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Kayne Anderson BDC	0	2	2	0	2.50
Gladstone Investment	0	1	3	0	2.75

Kayne Anderson BDC currently has a consensus target price of $15.12, indicating a potential upside of 12.36%. Gladstone Investment has a consensus target price of $16.75, indicating a potential upside of 5.02%. Given Kayne Anderson BDC’s higher probable upside, equities research analysts clearly believe Kayne Anderson BDC is more favorable than Gladstone Investment.

Valuation and Earnings

This table compares Kayne Anderson BDC and Gladstone Investment”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Kayne Anderson BDC	$235.82 million	3.79	$93.71 million	$1.28	10.52
Gladstone Investment	$99.08 million	6.41	$184.75 million	$4.69	3.40

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

Summary

Gladstone Investment beats Kayne Anderson BDC on 9 of the 16 factors compared between the two stocks.

About Kayne Anderson BDC

Kayne Anderson BDC Inc. is a business development company which invests primarily in first lien senior secured loans, with a secondary focus on unitranche and split-lien loans to middle market companies. Kayne Anderson BDC Inc. is based in CHICAGO.

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.