Critical Survey: Gladstone Investment (GAIN) vs. Hercules Capital (HTGC)

Gladstone Investment (NASDAQ: GAIN) and Hercules Capital (NYSE:HTGC) are both small-cap financials companies, but which is the superior business? We will compare the two companies based on the strength of their valuation, dividends, analyst recommendations, risk, profitability, institutional ownership and earnings.

Analyst Ratings

This is a breakdown of current recommendations and price targets for Gladstone Investment and Hercules Capital, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Gladstone Investment 0 2 0 0 2.00
Hercules Capital 0 4 7 0 2.64

Gladstone Investment currently has a consensus target price of $10.50, suggesting a potential downside of 7.00%. Hercules Capital has a consensus target price of $14.33, suggesting a potential upside of 10.19%. Given Hercules Capital’s stronger consensus rating and higher probable upside, analysts clearly believe Hercules Capital is more favorable than Gladstone Investment.

Volatility and Risk

Gladstone Investment has a beta of 0.74, suggesting that its stock price is 26% less volatile than the S&P 500. Comparatively, Hercules Capital has a beta of 0.87, suggesting that its stock price is 13% less volatile than the S&P 500.

Dividends

Gladstone Investment pays an annual dividend of $0.78 per share and has a dividend yield of 6.9%. Hercules Capital pays an annual dividend of $1.24 per share and has a dividend yield of 9.5%. Gladstone Investment pays out 57.8% of its earnings in the form of a dividend. Hercules Capital pays out 136.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Profitability

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

Net Margins Return on Equity Return on Assets
Gladstone Investment 80.07% 6.95% 4.27%
Hercules Capital 39.73% 12.93% 6.75%

Institutional and Insider Ownership

17.4% of Gladstone Investment shares are held by institutional investors. Comparatively, 38.8% of Hercules Capital shares are held by institutional investors. 2.4% of Gladstone Investment shares are held by company insiders. Comparatively, 3.2% of Hercules Capital shares are held by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company is poised for long-term growth.

Valuation and Earnings

This table compares Gladstone Investment and Hercules Capital’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Gladstone Investment $51.88 million 7.08 $44.76 million $1.35 8.36
Hercules Capital $175.05 million 6.25 $68.70 million $0.91 14.29

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

Summary

Hercules Capital beats Gladstone Investment on 12 of the 16 factors compared between the two stocks.

Gladstone Investment Company Profile

Gladstone Investment Corporation is an externally managed, closed-end, non-diversified management investment company. The Company’s investment objectives are to achieve and grow current income by investing in debt securities of established businesses that it believes will provide stable earnings and cash flow to pay expenses, make principal and interest payments on its outstanding indebtedness and make distributions to stockholders that grow over time, and provide its stockholders with long-term capital appreciation in the value of its assets by investing in equity securities, generally in combination with the aforementioned debt securities, of businesses that it believes can grow over time to permit it to sell its equity investments for capital gains. It has investments in sectors, such as chemicals, plastics, and rubber, and home and office furnishings, house wares, and durable consumer products, among others. Its investment advisor is Gladstone Management Corporation.

Hercules Capital Company Profile

Hercules Capital, Inc. is a specialty finance company. The Company is an internally managed, non-diversified, closed-end investment company. The Company focuses on providing senior secured venture growth loans to venture capital-backed companies in a range of technology, life sciences, and sustainable and renewable technology industries. The Company’s investment objective is to maximize its portfolio total return by generating current income from its debt investments and capital appreciation from its warrant and equity-related investments. The Company’s primary business objectives are to increase its net income, net operating income and net asset value (NAV) by investing in structured debt with warrants and equity of venture capital-backed companies in technology-related industries with attractive current yields and the potential for equity appreciation and realized gains. The Company focuses its investments in companies active in the technology industry sub-sectors.

Receive News & Ratings for Gladstone Investment Daily - Enter your email address below to receive a concise daily summary of the latest news and analysts' ratings for Gladstone Investment and related companies with MarketBeat.com's FREE daily email newsletter.

Leave a Reply