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1. Company Snapshot

1.a. Company Description

Gladstone Capital Corporation is a business development company specializing in lower middle market, growth capital, add on acquisitions, change of control, buy & build strategies, debt refinancing, debt investments in senior term loans, revolving loans, secured first and second lien term loans, senior subordinated loans, unitranche loans, junior subordinated loans, and mezzanine loans and equity investments in the form of common stock, preferred stock, limited liability company interests, or warrants.It operates as a business development company.The fund also makes private equity investments in acquisitions, buyouts and recapitalizations, and refinancing existing debts.


It targets small and medium-sized companies in United States.It is industry agnostic and seeks to invest in companies engaged in the business services, light and specialty manufacturing, niche industrial products and services, specialty consumer products and services, energy services, transportation and logistics, healthcare and education services, specialty chemicals, media and communications and aerospace and defense.The fund seeks to invest between $7 million and $30 million in companies that have between $20 million and $150 million in sales and EBITDA between $3 million and $25 million.


It prefers to acquire minority stakes.It seeks to exit its investments through strategic acquisitions by other industry participants or financial buyers, initial public offerings of common stock, or other capital market transactions.

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1.b. Last Insights on GLAD

Gladstone Capital Corporation faced negative drivers in recent months, primarily due to a dividend cut, which was attributed to declining floating rates. The company's decision to issue $130 million in convertible notes due 2030, with a 5.875% interest rate, may have also impacted its performance. Despite this, the company's Q4 2025 earnings beat estimates, with quarterly earnings of $0.52 per share. Additionally, Gladstone Capital's portfolio remains strong, focusing on defensive sectors like healthcare. A redeeming factor is the company's plan to redeem outstanding notes.

1.c. Company Highlights

2. Gladstone Capital's Q4 2025 Earnings: A Strong Performance

Gladstone Capital Corporation reported a robust fourth quarter 2025, with interest income rising 14% to $23.8 million, driven by a 16.2% increase in average earning assets. The company's net investment income was $11.4 million, and earnings per share (EPS) came in at $0.52, beating estimates of $0.504. The net realized losses were $6.3 million, and the company's portfolio turnover did not significantly impact its investment mix, with first lien debt rising to 72% of the portfolio's fair value.

Publication Date: Nov -30

📋 Highlights
  • Strong Q4 Originations: Fundings reached $126.6 million with net originations of $103.1 million, reflecting active portfolio expansion.
  • Interest Income Growth: Increased 14% to $23.8 million, driven by 16.2% higher average earning assets despite a 30 bps yield decline to 12.5%.
  • NAV Increase: Net asset value (NAV) per share rose to $21.34 from $21.25, with net assets up $7.6 million to $482 million.
  • Debt Management: $149.5 million convertible note issuance reduced leverage to 2.5% of NAV, with $130 million line of credit remaining available.
  • High-Yield Distributions: Monthly dividends of $0.15/share (9.6% yield) and a $100 million pipeline support growth expectations for 2026.

Financial Performance

The company's total assets stood at $908 million as of September 30, 2025, with investments at fair value totaling $859 million. Liabilities were $406 million, and net assets rose $7.6 million to $482 million. The NAV per share increased from $21.25 to $21.34. The company's debt management strategy is evident in its recent $149.5 million convertible note issue, which was used to pay down line of credit borrowings and retire debt.

Valuation and Dividend Yield

With a dividend yield of 10.76% and a P/B Ratio of 0.99, Gladstone Capital's stock appears attractively valued. The company's ROE stands at 11.91%, indicating a strong return on equity. The current cash yield may be sub-10%, but the overall yield on equity with NAV growth has been 16.7% over the last five years, suggesting a compelling long-term investment proposition.

Outlook and Credit Quality

Gladstone Capital expects continued growth in 2026, driven by a healthy pipeline of deals and a conservative leverage position. The company hasn't seen any new non-accruals this quarter, and its strategy of actively monitoring its investments allows it to take timely action. With a net debt to EBITDA ratio of 6.29, the company's leverage position is well-covered by its enterprise value.

Growth Prospects

Analysts estimate revenue growth at 12.5% for next year, driven by the company's strong pipeline and favorable market conditions. With private equity hold periods extended, Gladstone Capital is well-positioned to benefit from its existing investments. The company's cautious optimism about the lower middle market remaining insulated from spread erosion and financing terms erosion experienced in the larger middle market is also encouraging.

3. NewsRoom

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THE COLLAB WE'VE ALL BEEN WAITING FOR: GLAD DROPS TRASH-FILLED MUSICAL NUMBER STARRING OSCAR THE GROUCH

Dec -02

Source: prnewswire.com

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Gladstone Capital: The BDC Is Back On The Growth Track, It's A Buy

Nov -19

Source: seekingalpha.com

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Here Are Wednesday's Top Wall Street Analyst Research Calls: DoorDash, Freeport-McMoRan, GitLab, Home Depot, Medtronic, Molson-Coors, and More

Nov -19

Source: 247wallst.com

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Gladstone Capital (GLAD) Q4 2025 Earnings Call Transcript

Nov -18

Source: seekingalpha.com

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Gladstone Capital (GLAD) Tops Q4 Earnings and Revenue Estimates

Nov -17

Source: zacks.com

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Gladstone Capital Corporation Reports Financial Results for its Fourth Quarter and Fiscal Year Ended September 30, 2025

Nov -17

Source: accessnewswire.com

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Dividend Power Dogs: 12 Ideal Safer November Stars

Nov -16

Source: seekingalpha.com

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Gladstone Capital Corporation Earnings Call and Webcast Information

Nov -13

Source: accessnewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (10.20%)

6. Segments

Investment and Related Activities

Expected Growth: 10.2%

Gladstone Capital's investment and advisory services in private businesses drive growth, fueled by increasing demand for financing solutions and strategic guidance in the private equity market.

7. Detailed Products

Secured Loans

Gladstone Capital Corporation provides secured loans to small and medium-sized businesses, offering a flexible and customized financing solution to meet their unique needs.

Equity Co-Investments

Gladstone Capital Corporation offers equity co-investments, partnering with private equity firms and other investors to provide growth capital to businesses.

Syndicated Loans

Gladstone Capital Corporation participates in syndicated loans, providing financing to businesses alongside other lenders.

Second Lien Loans

Gladstone Capital Corporation offers second lien loans, providing additional financing to businesses with existing debt obligations.

Unitranche Loans

Gladstone Capital Corporation provides unitranche loans, offering a single loan that combines the benefits of senior and subordinated debt.

8. Gladstone Capital Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

Gladstone Capital Corporation operates in a niche industry, but there are some substitutes available in the market. However, the company's unique business model and expertise in the industry mitigate the threat of substitutes.

Bargaining Power Of Customers

Gladstone Capital Corporation's customers are largely institutional investors and high net worth individuals, who have limited bargaining power due to the company's specialized services and expertise.

Bargaining Power Of Suppliers

Gladstone Capital Corporation relies on a network of suppliers, including investment banks, lawyers, and other service providers. While the company has some bargaining power, suppliers also have some leverage due to the specialized nature of their services.

Threat Of New Entrants

The barriers to entry in the industry are relatively high, including regulatory hurdles and the need for specialized expertise. This limits the threat of new entrants and allows Gladstone Capital Corporation to maintain its market position.

Intensity Of Rivalry

The industry in which Gladstone Capital Corporation operates is highly competitive, with several established players competing for market share. The company must continually innovate and improve its services to maintain its market position.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 42.41%
Debt Cost 10.17%
Equity Weight 57.59%
Equity Cost 10.17%
WACC 10.17%
Leverage 73.63%

11. Quality Control: Gladstone Capital Corporation passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Gladstone Capital

A-Score: 7.2/10

Value: 6.9

Growth: 6.1

Quality: 8.0

Yield: 10.0

Momentum: 3.0

Volatility: 9.3

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PennantPark Floating Rate Capital

A-Score: 7.0/10

Value: 7.5

Growth: 4.4

Quality: 8.3

Yield: 10.0

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Volatility: 10.0

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Grosvenor Capital Management

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Value: 4.9

Growth: 4.3

Quality: 6.0

Yield: 8.0

Momentum: 6.0

Volatility: 10.0

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Hennessy Advisors

A-Score: 6.5/10

Value: 7.8

Growth: 2.7

Quality: 8.0

Yield: 9.0

Momentum: 6.0

Volatility: 5.3

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A-Score: 5.7/10

Value: 6.0

Growth: 4.7

Quality: 3.2

Yield: 10.0

Momentum: 0.5

Volatility: 10.0

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

21.12$

Current Price

21.12$

Potential

-0.00%

Expected Cash-Flows