Head-To-Head Comparison: TPG Specialty Lending (TSLX) vs. Gladstone Capital (GLAD)

TPG Specialty Lending (NYSE: TSLX) and Gladstone Capital (NASDAQ:GLAD) are both small-cap financials companies, but which is the superior investment? We will compare the two businesses based on the strength of their institutional ownership, earnings, valuation, risk, profitability, analyst recommendations and dividends.

Dividends

TPG Specialty Lending pays an annual dividend of $1.56 per share and has a dividend yield of 8.6%. Gladstone Capital pays an annual dividend of $0.84 per share and has a dividend yield of 9.5%. TPG Specialty Lending pays out 83.9% 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.

Earnings and Valuation

This table compares TPG Specialty Lending and Gladstone Capital’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
TPG Specialty Lending $210.90 million 5.22 $107.33 million $1.86 9.80
Gladstone Capital $39.23 million 5.97 $17.18 million $0.90 9.78

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

Analyst Ratings

This is a summary of current recommendations and price targets for TPG Specialty Lending and Gladstone Capital, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
TPG Specialty Lending 0 1 3 0 2.75
Gladstone Capital 0 3 2 0 2.40

TPG Specialty Lending currently has a consensus target price of $21.17, suggesting a potential upside of 16.17%. Gladstone Capital has a consensus target price of $9.16, suggesting a potential upside of 4.12%. Given TPG Specialty Lending’s stronger consensus rating and higher probable upside, equities analysts clearly believe TPG Specialty Lending is more favorable than Gladstone Capital.

Institutional & Insider Ownership

62.9% of TPG Specialty Lending shares are held by institutional investors. Comparatively, 15.2% of Gladstone Capital shares are held by institutional investors. 4.9% of TPG Specialty Lending shares are held by insiders. Comparatively, 5.9% of Gladstone Capital shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.

Profitability

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

Net Margins Return on Equity Return on Assets
TPG Specialty Lending 53.80% 12.46% 7.55%
Gladstone Capital 58.48% 9.97% 5.95%

Volatility & Risk

TPG Specialty Lending has a beta of 0.58, indicating that its share price is 42% less volatile than the S&P 500. Comparatively, Gladstone Capital has a beta of 1.11, indicating that its share price is 11% more volatile than the S&P 500.

Summary

TPG Specialty Lending beats Gladstone Capital on 11 of the 16 factors compared between the two stocks.

About TPG Specialty Lending

TPG Specialty Lending, Inc. is an externally managed, closed-end, non-diversified management investment company. The Company is a specialty finance company focused on lending to middle-market companies. It seeks to generate current income primarily in the United States-domiciled middle-market companies through direct originations of senior secured loans and originations of mezzanine and unsecured loans and investments in corporate bonds and equity securities. The Company invests in first-lien debt, second-lien debt, mezzanine and unsecured debt and equity and other investments. Its first-lien debt may include standalone first-lien loans; last out first-lien loans; unitranche loans and secured corporate bonds. Its second-lien debt may include secured loans and secured corporate bonds, with a secondary priority behind first-lien debt. As of December 31, 2016, the Company’s portfolio was invested across 19 different industries. The Company’s investment advisor is TSL Advisers, LLC.

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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