Gladstone Capital Corporation’s (GLAD) Sell Rating Reaffirmed at National Securities
National Securities restated their sell rating on shares of Gladstone Capital Corporation (NASDAQ:GLAD) in a research note issued to investors on Tuesday. The firm currently has a $8.00 price target on the investment management company’s stock.
“• Gladstone offered $51.8 million of 2024 term preferred stock (gross, inclusive of the green shoe) at 6.00% and subsequently redeemed its $6.75% 2021 preferred stock. The 75 bps savings is much needed as GLAD has historically had a relatively high cost of capital compared to peers. We expect the credit facility to average 50.4% of funding for fiscal 2017 and 64.2% for fiscal 2018 and expect the rate on the credit facility to be lowered in fiscal 2Q18. As a result we project the all-in cost of funds to decline to 5.75% for fiscal 2018 from our 6.64% estimate for fiscal 2017.
• While the interest savings are a positive for NIM (net investment margin) we note that we expect earnings growth to be muted for Gladstone as the cost of capital remains high relative to where loans are currently priced. Despite the LMM not being as frothy as the UMM and broadly syndicated market, there is nonetheless still spread compression and we expect that GLAD will pivot from its increased second lien exposure in favor of more first lien debt and this will also weigh on yields.
• We remain SELL rated on Gladstone given a valuation we think is above where the fair value of the stock should be. Our $8 price target is a mere 5% fiscal 4Q18E NAV/share discount, which we think is reasonable, especially for a LMM lender with 42% of its portfolio at cost in second lien debt and over 8% of the portfolio at fair value in oil and gas. We are revising our fiscal 2017 NII/share estimate to $0.84 from $0.85 and our fiscal 2018 NII/share estimate to $0.87 from $0.85.,” National Securities’ analyst commented.
Several other analysts also recently weighed in on GLAD. Zacks Investment Research downgraded shares of Gladstone Capital Corporation from a buy rating to a hold rating in a research report on Tuesday, May 30th. BidaskClub downgraded shares of Gladstone Capital Corporation from a buy rating to a hold rating in a research report on Monday, July 17th. One investment analyst has rated the stock with a sell rating, four have given a hold rating and one has issued a buy rating to the company. The company has an average rating of Hold and a consensus target price of $9.53.
Gladstone Capital Corporation (GLAD) opened at 9.50 on Tuesday. Gladstone Capital Corporation has a 12 month low of $7.33 and a 12 month high of $10.12. The firm’s 50-day moving average is $9.42 and its 200 day moving average is $9.60.
Gladstone Capital Corporation (NASDAQ:GLAD) last issued its quarterly earnings data on Wednesday, August 2nd. The investment management company reported $0.21 earnings per share for the quarter, meeting the Thomson Reuters’ consensus estimate of $0.21. The firm had revenue of $9.63 million for the quarter, compared to the consensus estimate of $10.30 million. Gladstone Capital Corporation had a net margin of 85.01% and a return on equity of 9.88%. Equities research analysts forecast that Gladstone Capital Corporation will post $0.78 EPS for the current fiscal year.
The business also recently declared a monthly dividend, which was paid on Thursday, August 31st. Shareholders of record on Monday, August 21st were given a dividend of $0.07 per share. The ex-dividend date was Thursday, August 17th. This represents a $0.84 dividend on an annualized basis and a dividend yield of 8.84%. Gladstone Capital Corporation’s dividend payout ratio (DPR) is 62.22%.
In related news, President Robert L. Marcotte purchased 4,000 shares of the company’s stock in a transaction on Thursday, August 31st. The shares were bought at an average cost of $9.22 per share, for a total transaction of $36,880.00. Following the transaction, the president now owns 370,720 shares of the company’s stock, valued at $3,418,038.40. The purchase was disclosed in a legal filing with the Securities & Exchange Commission, which is accessible through the SEC website. 6.45% of the stock is currently owned by insiders.
Hedge funds have recently added to or reduced their stakes in the business. Koshinski Asset Management Inc. raised its position in shares of Gladstone Capital Corporation by 3.9% during the 2nd quarter. Koshinski Asset Management Inc. now owns 25,644 shares of the investment management company’s stock worth $252,000 after buying an additional 966 shares in the last quarter. Advisors Asset Management Inc. raised its position in shares of Gladstone Capital Corporation by 7.0% during the 2nd quarter. Advisors Asset Management Inc. now owns 171,702 shares of the investment management company’s stock worth $1,688,000 after buying an additional 11,189 shares in the last quarter. First Financial Equity Corporation bought a new stake in shares of Gladstone Capital Corporation during the 1st quarter worth about $135,000. Bank of Montreal Can bought a new stake in shares of Gladstone Capital Corporation during the 2nd quarter worth about $1,946,000. Finally, Van ECK Associates Corp raised its position in shares of Gladstone Capital Corporation by 13.5% during the 2nd quarter. Van ECK Associates Corp now owns 221,397 shares of the investment management company’s stock worth $2,176,000 after buying an additional 26,262 shares in the last quarter. Institutional investors own 14.42% of the company’s stock.
About Gladstone Capital Corporation
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.
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