Critical Survey: Golub Capital BDC (NASDAQ:GBDC) and Runway Growth Finance (NASDAQ:RWAY)

Golub Capital BDC (NASDAQ:GBDC) and Runway Growth Finance (NASDAQ:RWAY) are both finance companies, but which is the better business? We will compare the two companies based on the strength of their analyst recommendations, institutional ownership, profitability, valuation, risk, dividends and earnings.

Institutional & Insider Ownership

42.4% of Golub Capital BDC shares are held by institutional investors. Comparatively, 64.6% of Runway Growth Finance shares are held by institutional investors. 1.4% of Golub Capital BDC shares are held by insiders. Comparatively, 1.0% of Runway Growth Finance shares are held by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Risk & Volatility

Golub Capital BDC has a beta of 0.45, meaning that its share price is 55% less volatile than the S&P 500. Comparatively, Runway Growth Finance has a beta of 0.7, meaning that its share price is 30% less volatile than the S&P 500.

Dividends

Golub Capital BDC pays an annual dividend of $1.32 per share and has a dividend yield of 10.4%. Runway Growth Finance pays an annual dividend of $1.32 per share and has a dividend yield of 19.2%. Golub Capital BDC pays out 105.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Runway Growth Finance pays out 143.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Analyst Recommendations

This is a breakdown of recent recommendations for Golub Capital BDC and Runway Growth Finance, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Golub Capital BDC	0	1	3	1	3.00
Runway Growth Finance	1	4	3	0	2.25

Golub Capital BDC presently has a consensus target price of $14.38, indicating a potential upside of 13.55%. Runway Growth Finance has a consensus target price of $9.60, indicating a potential upside of 39.74%. Given Runway Growth Finance’s higher probable upside, analysts clearly believe Runway Growth Finance is more favorable than Golub Capital BDC.

Profitability

This table compares Golub Capital BDC and Runway Growth Finance’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Golub Capital BDC	38.57%	10.37%	4.58%
Runway Growth Finance	24.79%	11.52%	5.69%

Valuation and Earnings

This table compares Golub Capital BDC and Runway Growth Finance”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Golub Capital BDC	$362.27 million	9.20	$376.65 million	$1.25	10.13
Runway Growth Finance	$137.33 million	1.81	$34.05 million	$0.92	7.47

Golub Capital BDC has higher revenue and earnings than Runway Growth Finance. Runway Growth Finance is trading at a lower price-to-earnings ratio than Golub Capital BDC, indicating that it is currently the more affordable of the two stocks.

Summary

Golub Capital BDC beats Runway Growth Finance on 10 of the 16 factors compared between the two stocks.

About Golub Capital BDC

Golub Capital BDC, Inc. (GBDC) is a business development company and operates as an externally managed closed-end non-diversified management investment company. It invests in debt and minority equity investments in middle-market companies that are, in most cases, sponsored by private equity investors. It typically invests in diversified consumer services, automobiles, healthcare technology, insurance, health care equipment and supplies, hotels, restaurants and leisure, healthcare providers and services, IT services and specialty retails. It seeks to invest in the United States. It primarily invests in first lien traditional senior debt, first lien one stop, junior debt and equity, senior secured, one stop, unitranche, second lien, subordinated and mezzanine loans of middle-market companies, and warrants.

About Runway Growth Finance

Runway Growth Finance Corp. is a business development company specializing investments in senior-secured loans to late stage and growth companies. It prefers to make investments in companies engaged in the technology, life sciences, healthcare and information services, business services and select consumer services and products sectors. It prefers to investments in companies engaged in electronic equipment and instruments, systems software, hardware, storage and peripherals and specialized consumer services, application software, healthcare technology, internet software and services, data processing and outsourced services, internet retail, human resources and employment services, biotechnology, healthcare equipment and education services. It invests in senior secured loans between $10 million and $75 million.