Contrasting Apollo Investment (AINV) & Gladstone Capital (GLAD)

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

Analyst Recommendations

This is a summary of recent recommendations and price targets for Apollo Investment and Gladstone Capital, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Apollo Investment 0 4 5 0 2.56
Gladstone Capital 0 2 1 0 2.33

Apollo Investment presently has a consensus price target of $6.42, suggesting a potential upside of 11.21%. Gladstone Capital has a consensus price target of $8.70, suggesting a potential downside of 10.03%. Given Apollo Investment’s stronger consensus rating and higher probable upside, equities analysts clearly believe Apollo Investment is more favorable than Gladstone Capital.

Profitability

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

Net Margins Return on Equity Return on Assets
Apollo Investment 27.90% 9.20% 5.40%
Gladstone Capital 75.38% 9.84% 5.66%

Insider & Institutional Ownership

47.3% of Apollo Investment shares are held by institutional investors. Comparatively, 13.0% of Gladstone Capital shares are held by institutional investors. 0.4% of Apollo Investment shares are held by insiders. Comparatively, 5.9% of Gladstone Capital shares are held by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock is poised for long-term growth.

Dividends

Apollo Investment pays an annual dividend of $0.60 per share and has a dividend yield of 10.4%. Gladstone Capital pays an annual dividend of $0.84 per share and has a dividend yield of 8.7%. Apollo Investment pays out 98.4% 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 100.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Apollo Investment is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk and Volatility

Apollo Investment has a beta of 0.93, suggesting that its share price is 7% less volatile than the S&P 500. Comparatively, Gladstone Capital has a beta of 1.12, suggesting that its share price is 12% more volatile than the S&P 500.

Valuation and Earnings

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

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Apollo Investment $259.29 million 4.78 $87.02 million $0.61 9.46
Gladstone Capital $39.23 million 6.85 $17.18 million $0.84 11.51

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

Apollo Investment Company Profile

Apollo Investment Corporation is business development company specializing in middle market companies. It provides direct equity capital, mezzanine and senior secured loans, unsecured debt, and subordinated debt and loans. It also seeks to invest in PIPES transactions. The fund may also invest in securities of public companies that are thinly traded and may acquire investments in the secondary market and structured products. It prefers to invest in warrants, makes equity co-investments, and may also invest in cash equivalents, U.S. government securities, high-quality debt investments that mature in one year or less, high-yield bonds, distressed debt, non-U.S. investments, or securities of public companies that are not thinly traded. It also focuses on other investments such as collateralized loan obligations and credit-linked notes. The fund typically invests in building materials, business services, cable television, chemicals, consumer products, direct marketing, distribution, energy and utilities, financial services, healthcare, manufacturing, media, publishing, retail and transportation. It primarily invests between $20 million and $250 million in its portfolio companies. The fund seeks to make investments with stated maturities of five to 10 years.

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.

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