Harvest Capital Credit (NASDAQ: HCAP) 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 valuation, earnings, profitability, dividends, analyst recommendations, risk and institutional ownership.
Harvest Capital Credit pays an annual dividend of $1.35 per share and has a dividend yield of 13.2%. Gladstone Capital pays an annual dividend of $0.84 per share and has a dividend yield of 9.3%. Harvest Capital Credit pays out 287.2% 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 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.
This table compares Harvest Capital Credit and Gladstone Capital’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|Harvest Capital Credit||14.76%||11.04%||6.80%|
This is a breakdown of current recommendations for Harvest Capital Credit and Gladstone Capital, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|Harvest Capital Credit||0||2||0||0||2.00|
Harvest Capital Credit currently has a consensus target price of $13.50, indicating a potential upside of 32.22%. Gladstone Capital has a consensus target price of $9.16, indicating a potential upside of 1.24%. Given Harvest Capital Credit’s higher probable upside, analysts clearly believe Harvest Capital Credit is more favorable than Gladstone Capital.
Institutional and Insider Ownership
5.7% of Harvest Capital Credit shares are owned by institutional investors. Comparatively, 14.3% of Gladstone Capital shares are owned by institutional investors. 9.5% of Harvest Capital Credit shares are owned by company insiders. Comparatively, 5.9% of Gladstone Capital shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.
Volatility and Risk
Harvest Capital Credit has a beta of 0.7, suggesting that its share price is 30% less volatile than the S&P 500. Comparatively, Gladstone Capital has a beta of 1.1, suggesting that its share price is 10% more volatile than the S&P 500.
Earnings and Valuation
This table compares Harvest Capital Credit and Gladstone Capital’s top-line revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||Net Income||Earnings Per Share||Price/Earnings Ratio|
|Harvest Capital Credit||$20.89 million||3.17||$6.00 million||$0.47||21.72|
|Gladstone Capital||$39.23 million||6.14||$17.18 million||$0.90||10.06|
Gladstone Capital has higher revenue and earnings than Harvest Capital Credit. Gladstone Capital is trading at a lower price-to-earnings ratio than Harvest Capital Credit, indicating that it is currently the more affordable of the two stocks.
Gladstone Capital beats Harvest Capital Credit on 11 of the 16 factors compared between the two stocks.
About Harvest Capital Credit
Harvest Capital Credit Corporation is an externally managed, closed-end, non-diversified management investment company. The Company operates as a business development company and provides customized financing solutions for small to mid-sized companies. Its investment objective is to generate both current income and capital appreciation by making direct investments in the form of subordinated debt, senior debt, and to a lesser extent, minority equity investments in privately-held the United States small to mid-sized companies. Its investment portfolio includes over 56.8% of senior secured term loans, 40.8% of junior secured term loans, 1.3% of equity investments and 1.1% of collateralized loan obligation (CLO) equity at fair value. It may also invest in other investments, such as loans to larger, publicly-traded companies, high-yield bonds and distressed debt securities. It may also invest in debt and equity securities issued by CLO funds. HCAP Advisors LLC is its investment adviser.
About Gladstone Capital
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.
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