Financial Comparison: Gladstone Investment (NASDAQ:GAIN) vs. Palmer Square Capital BDC (NYSE:PSBD)

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

Dividends

Gladstone Investment pays an annual dividend of $0.96 per share and has a dividend yield of 6.8%. Palmer Square Capital BDC pays an annual dividend of $1.44 per share and has a dividend yield of 13.8%. Gladstone Investment pays out 30.9% of its earnings in the form of a dividend. Palmer Square Capital BDC pays out -1,309.1% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Palmer Square Capital BDC is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation and Earnings

This table compares Gladstone Investment and Palmer Square Capital BDC”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Gladstone Investment	$93.66 million	5.97	$65.32 million	$3.11	4.52
Palmer Square Capital BDC	$1.17 million	279.20	-$3.17 million	($0.11)	-94.82

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

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Gladstone Investment	118.55%	6.77%	3.22%
Palmer Square Capital BDC	-2.55%	10.82%	4.13%

Risk and Volatility

Gladstone Investment has a beta of 0.82, suggesting that its stock price is 18% less volatile than the S&P 500. Comparatively, Palmer Square Capital BDC has a beta of 0.78, suggesting that its stock price is 22% less volatile than the S&P 500.

Insider & Institutional Ownership

11.9% of Gladstone Investment shares are held by institutional investors. Comparatively, 6.5% of Palmer Square Capital BDC shares are held by institutional investors. 2.4% of Gladstone Investment shares are held by company insiders. Comparatively, 1.1% of Palmer Square Capital BDC shares are held by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent recommendations for Gladstone Investment and Palmer Square Capital BDC, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Gladstone Investment	0	4	1	0	2.20
Palmer Square Capital BDC	0	4	0	0	2.00

Palmer Square Capital BDC has a consensus price target of $11.88, suggesting a potential upside of 13.85%. Given Palmer Square Capital BDC’s higher possible upside, analysts plainly believe Palmer Square Capital BDC is more favorable than Gladstone Investment.

Summary

Gladstone Investment beats Palmer Square Capital BDC on 10 of the 16 factors compared between the two stocks.

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.

About Palmer Square Capital BDC

Palmer Square Capital BDC Inc. is an externally managed, non-diversified closed-end management investment company which primarily lends to and invests in corporate debt securities, including small to large private U.S. companies and has elected to be regulated as a business development company. Palmer Square Capital BDC Inc. is based in MISSION WOODS, Kan.