TPG Specialty Lending (TSLX) and Golub Capital BDC (GBDC) Head to Head Survey

TPG Specialty Lending (NYSE: TSLX) and Golub Capital BDC (NASDAQ:GBDC) are both small-cap finance companies, but which is the better business? We will compare the two businesses based on the strength of their earnings, dividends, valuation, institutional ownership, profitability, risk and analyst recommendations.

Profitability

This table compares TPG Specialty Lending and Golub Capital BDC’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
TPG Specialty Lending 54.68% 12.45% 7.21%
Golub Capital BDC 58.88% 8.11% 4.29%

Dividends

TPG Specialty Lending pays an annual dividend of $1.56 per share and has a dividend yield of 8.1%. Golub Capital BDC pays an annual dividend of $1.28 per share and has a dividend yield of 6.9%. TPG Specialty Lending pays out 78.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Golub Capital BDC pays out 102.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. TPG Specialty Lending is clearly the better dividend stock, given its higher yield and lower payout ratio.

Insider and Institutional Ownership

61.9% of TPG Specialty Lending shares are owned by institutional investors. Comparatively, 38.0% of Golub Capital BDC shares are owned by institutional investors. 4.8% of TPG Specialty Lending shares are owned by company insiders. Comparatively, 10.7% of Golub Capital BDC shares are owned by company insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a stock will outperform the market over the long term.

Valuation and Earnings

This table compares TPG Specialty Lending and Golub Capital BDC’s gross revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
TPG Specialty Lending $210.90 million 5.90 $120.25 million $2.00 9.58
Golub Capital BDC $137.76 million 8.11 $82.28 million $1.25 14.93

TPG Specialty Lending has higher revenue and earnings than Golub Capital BDC. TPG Specialty Lending 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.

Volatility and Risk

TPG Specialty Lending has a beta of 0.61, meaning that its stock price is 39% less volatile than the S&P 500. Comparatively, Golub Capital BDC has a beta of 0.61, meaning that its stock price is 39% less volatile than the S&P 500.

Analyst Ratings

This is a summary of recent recommendations and price targets for TPG Specialty Lending and Golub Capital BDC, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
TPG Specialty Lending 0 1 5 0 2.83
Golub Capital BDC 0 1 1 0 2.50

TPG Specialty Lending presently has a consensus target price of $20.60, suggesting a potential upside of 7.52%. Golub Capital BDC has a consensus target price of $20.50, suggesting a potential upside of 9.86%. Given Golub Capital BDC’s higher probable upside, analysts plainly believe Golub Capital BDC is more favorable than TPG Specialty Lending.

Summary

TPG Specialty Lending beats Golub Capital BDC on 10 of the 15 factors compared between the two stocks.

TPG Specialty Lending Company Profile

TPG Specialty Lending, Inc. is an externally managed, closed-end, non-diversified management investment company. The Company is a specialty finance company focused on lending to middle-market companies. It seeks to generate current income primarily in the United States-domiciled middle-market companies through direct originations of senior secured loans and originations of mezzanine and unsecured loans and investments in corporate bonds and equity securities. The Company invests in first-lien debt, second-lien debt, mezzanine and unsecured debt and equity and other investments. Its first-lien debt may include standalone first-lien loans; last out first-lien loans; unitranche loans and secured corporate bonds. Its second-lien debt may include secured loans and secured corporate bonds, with a secondary priority behind first-lien debt. As of December 31, 2016, the Company’s portfolio was invested across 19 different industries. The Company’s investment advisor is TSL Advisers, LLC.

Golub Capital BDC Company Profile

Golub Capital BDC, Inc. 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. The company seeks to invest in the United States. It primarily invests in senior secured, one stop, unitranche, second lien, subordinated and mezzanine loans of middle-market companies, and warrants.

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