Head-To-Head Comparison: Gladstone Investment (NASDAQ:GAIN) vs. OFS Capital (NASDAQ:OFS)

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

Insider and Institutional Ownership

11.8% of Gladstone Investment shares are held by institutional investors. Comparatively, 10.8% of OFS Capital shares are held by institutional investors. 2.2% of Gladstone Investment shares are held by company insiders. Comparatively, 0.5% of OFS Capital shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company is poised for long-term growth.

Valuation & Earnings

This table compares Gladstone Investment and OFS Capital”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Gladstone Investment	$99.08 million	5.98	$184.75 million	$3.86	3.85
OFS Capital	$40.69 million	1.21	-$33.09 million	($2.11)	-1.74

Gladstone Investment has higher revenue and earnings than OFS Capital. OFS Capital 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 OFS Capital’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Gladstone Investment	149.34%	5.31%	2.56%
OFS Capital	-91.39%	6.09%	2.20%

Analyst Ratings

This is a breakdown of recent ratings and target prices for Gladstone Investment and OFS Capital, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Gladstone Investment	0	2	3	0	2.60
OFS Capital	1	1	0	0	1.50

Gladstone Investment presently has a consensus price target of $16.83, indicating a potential upside of 13.13%. Given Gladstone Investment’s stronger consensus rating and higher probable upside, equities analysts plainly believe Gladstone Investment is more favorable than OFS Capital.

Volatility and Risk

Gladstone Investment has a beta of 0.72, meaning that its share price is 28% less volatile than the S&P 500. Comparatively, OFS Capital has a beta of 0.85, meaning that its share price is 15% less volatile than the S&P 500.

Dividends

Gladstone Investment pays an annual dividend of $0.96 per share and has a dividend yield of 6.5%. OFS Capital pays an annual dividend of $0.68 per share and has a dividend yield of 18.5%. Gladstone Investment pays out 24.9% of its earnings in the form of a dividend. OFS Capital pays out -32.2% 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. OFS Capital has raised its dividend for 3 consecutive years. OFS Capital is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.

Summary

Gladstone Investment beats OFS Capital on 12 of the 17 factors compared between the two stocks.

About Gladstone Investment

Gladstone Investment Corporation is a publicly traded business development company that provides debt and equity capital to established lower middle-market businesses in the United States. The company invests in connection with management buyouts, acquisitions, recapitalizations and growth initiatives. Its investments may include secured loans and ownership stakes, allowing Gladstone Investment to support portfolio companies with both financing and equity capital. The company typically seeks businesses with established operations and opportunities for continued development.

About OFS Capital

OFS Capital Corporation (NASDAQ:OFS) is a business development company that provides financing to privately owned U.S. companies. The company primarily invests in lower middle-market businesses, which are generally companies that may have limited access to traditional bank financing or public capital markets. OFS Capital’s investment activities focus on providing secured loans, subordinated debt and, to a lesser extent, equity investments. Its financing may support acquisitions, recapitalizations, refinancing, growth initiatives and other corporate activities.