OFS Capital (OFS) vs. Gladstone Capital (GLAD) Financial Survey

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

Insider and Institutional Ownership

14.3% of Gladstone Capital shares are owned by institutional investors. Comparatively, 27.7% of OFS Capital shares are owned by institutional investors. 5.9% of Gladstone Capital shares are owned by company insiders. Comparatively, 0.0% of OFS Capital shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Profitability

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

Net Margins Return on Equity Return on Assets
Gladstone Capital 58.48% 9.97% 5.95%
OFS Capital 25.74% 9.43% 4.79%

Dividends

Gladstone Capital pays an annual dividend of $0.84 per share and has a dividend yield of 9.5%. OFS Capital pays an annual dividend of $1.36 per share and has a dividend yield of 11.9%. Gladstone Capital pays out 93.3% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. OFS Capital pays out 147.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Analyst Recommendations

This is a summary of recent recommendations for Gladstone Capital and OFS Capital, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Gladstone Capital 0 3 2 0 2.40
OFS Capital 0 1 3 0 2.75

Gladstone Capital presently has a consensus price target of $9.16, suggesting a potential upside of 3.30%. OFS Capital has a consensus price target of $14.67, suggesting a potential upside of 28.65%. Given OFS Capital’s stronger consensus rating and higher probable upside, analysts plainly believe OFS Capital is more favorable than Gladstone Capital.

Risk and Volatility

Gladstone Capital has a beta of 1.11, meaning that its share price is 11% more volatile than the S&P 500. Comparatively, OFS Capital has a beta of 0.41, meaning that its share price is 59% less volatile than the S&P 500.

Valuation & Earnings

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Gladstone Capital $39.23 million 6.02 $17.18 million $0.90 9.86
OFS Capital $31.09 million 4.89 $13.82 million $0.92 12.39

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

Summary

Gladstone Capital beats OFS Capital on 10 of the 16 factors compared between the two stocks.

Gladstone Capital Company Profile

Gladstone Capital Corporation is a closed-end, non-diversified management investment company, operating as a business development company (BDC). The objectives of the Company 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 to provide its stockholders with long-term capital appreciation in the value of its assets by investing in equity securities of established businesses that it believes can grow over time to permit it to sell its equity investments for capital gains. The Company is focused on investing in lower middle-market companies in the United States. It has investments in south, Midwest, west and northeast of the United States. Its portfolio allocation includes debt investments and equity investments.

OFS Capital Company Profile

OFS Capital Corporation (OFS Capital) is an externally managed, closed-end, non-diversified management investment company. The Company’s investment objective is to provide its shareholders with both current income and capital appreciation primarily through debt investments and equity investments. It focuses primarily on middle-market companies in the United States, including senior secured loans, including first-lien, second-lien and unitranche loans, as well as subordinated loans, and warrants and other minority equity securities. The Company may make investments directly or through OFS SBIC I, LP (SBIC I LP), its investment company subsidiary. It focuses on investments in loans, in which OFS Advisor’s investment professionals have expertise, including investments in first-lien, unitranche, second-lien, and mezzanine loans and, to a lesser extent, on warrants and other equity securities. The Company’s investment activities are managed by OFS Capital Management, LLC (OFS Advisor).

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