National Securities restated their sell rating on shares of Gladstone Capital (NASDAQ:GLAD) in a research note published on Monday. They currently have a $7.00 price target on the investment management company’s stock.
“ Gladstone’s NAV/share decreased by 4.1% on the quarter to $7.98 from $8.32 after falling by 6.1% Q/Q the quarter prior. Francis was marked at 27% of cost last quarter and during the 12/31/18 quarter GLAD recognized a $26.9mm realized loss on Francis. With the chapter 11 restructuring, Gladstone’s $27.0mm of debt in Francis was rolled into $1.35mm of equity and the company also purchased an additional $5.0mm of equity in the new entity, “FES Resources.”
The portfolio at fair value increased to $431.2mm from $390.1mm Q/Q as Gladstone had very robust originations of $59.2mm and only $8.9mm of repayments. During the quarter the company issued $57.5mm of 2023 notes and has the ability to go above 1.00x D/E. We expect the company to exceed 1.00x in F3Q20 although thus far the company has not decided to reduce fees on incrementally higher leverage and thus the benefit to shareholders from this increase is likely to be muted as fees increase with the augmented balance sheet.
The market has, in our opinion, surprisingly shrugged off substantial NAV declines and continued to award GLAD shares a 12% premium to 12/31/18 NAV (as of 2/8/19). Despite the dividend being earned on a NII basis we do not expect NII/share to have growth levers.
Additionally, while GLAD wrapped up 12/31/18 with no non-accruals after the restructuring of Francis, we think there is heightened risk that the largely non-sponsor LMM portfolio experiences further stress going forward. Accordingly, we continue to think shares warrant a discount to forward NAV estimates. We note that our target price of $7 represents an 11% discount to our F4Q20 NAV/share estimate of $7.83, which is only a decrease of 1.9% from F1Q19 levels.
We are maintaining our fiscal 2019 NII/share estimate of $0.84 and revising our fiscal 2020 NII/share estimate to $0.86 from $0.84. ,” the firm’s analyst commented.
Several other equities research analysts also recently commented on the company. BidaskClub upgraded Gladstone Capital from a hold rating to a buy rating in a report on Friday, February 8th. Zacks Investment Research upgraded Gladstone Capital from a sell rating to a hold rating in a report on Monday, January 21st. ValuEngine upgraded Gladstone Capital from a sell rating to a hold rating in a report on Thursday, December 27th. Finally, TheStreet downgraded Gladstone Capital from a b- rating to a c rating in a report on Monday, December 10th. Two analysts have rated the stock with a sell rating, one has assigned a hold rating and one has assigned a buy rating to the company’s stock. Gladstone Capital has a consensus rating of Hold and an average target price of $9.00.
Gladstone Capital (NASDAQ:GLAD) last issued its earnings results on Wednesday, February 6th. The investment management company reported $0.21 earnings per share for the quarter, hitting the Zacks’ consensus estimate of $0.21. The business had revenue of $11.91 million during the quarter, compared to the consensus estimate of $12.13 million. Gladstone Capital had a return on equity of 9.99% and a net margin of 16.68%. Equities analysts predict that Gladstone Capital will post 0.85 earnings per share for the current fiscal year.
The company also recently disclosed a monthly dividend, which will be paid on Thursday, February 28th. Stockholders of record on Wednesday, February 20th will be issued a dividend of $0.07 per share. The ex-dividend date of this dividend is Tuesday, February 19th. This represents a $0.84 annualized dividend and a dividend yield of 9.49%. Gladstone Capital’s dividend payout ratio is 98.82%.
In related news, President Robert L. Marcotte purchased 10,000 shares of the firm’s stock in a transaction that occurred on Tuesday, November 20th. The stock was acquired at an average price of $8.71 per share, for a total transaction of $87,100.00. The transaction was disclosed in a filing with the Securities & Exchange Commission, which is available at this link. Also, President Robert L. Marcotte purchased 12,000 shares of the firm’s stock in a transaction that occurred on Friday, December 7th. The shares were bought at an average price of $8.33 per share, with a total value of $99,960.00. Following the acquisition, the president now directly owns 460,037 shares of the company’s stock, valued at approximately $3,832,108.21. The disclosure for this purchase can be found here. In the last 90 days, insiders have bought 22,582 shares of company stock valued at $192,077. Corporate insiders own 5.85% of the company’s stock.
Institutional investors have recently made changes to their positions in the stock. PFG Advisors bought a new stake in Gladstone Capital during the fourth quarter worth $84,000. TCI Wealth Advisors Inc. grew its holdings in Gladstone Capital by 53.4% during the fourth quarter. TCI Wealth Advisors Inc. now owns 25,082 shares of the investment management company’s stock worth $183,000 after buying an additional 8,733 shares in the last quarter. Koshinski Asset Management Inc. bought a new stake in Gladstone Capital during the third quarter worth $256,000. Novare Capital Management LLC grew its holdings in Gladstone Capital by 37.0% during the third quarter. Novare Capital Management LLC now owns 32,750 shares of the investment management company’s stock worth $311,000 after buying an additional 8,850 shares in the last quarter. Finally, California Public Employees Retirement System grew its holdings in Gladstone Capital by 18.5% during the second quarter. California Public Employees Retirement System now owns 44,200 shares of the investment management company’s stock worth $398,000 after buying an additional 6,900 shares in the last quarter. Institutional investors and hedge funds own 11.73% of the company’s stock.
Gladstone Capital Company Profile
Gladstone Capital Corporation is a private equity and a venture capital fund specializing in lower middle market, growth capital, add on acquisitions, debt investments in senior loans, second lien loans, senior subordinated loans, junior subordinated loans, and mezzanine loans and equity investments in the form of common stock, preferred stock, limited liability company interests, or warrants.
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