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Gladstone Capital Corp (GLAD)
NASDAQ:GLAD
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Gladstone Capital
(NASDAQ:GLAD)
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Rating:59Neutral
Price Target:
$20.00
▲(8.17% Upside)
Action:ReiteratedDate:02/06/26
The score is primarily held back by unstable cash-flow quality and weak technical momentum (below key moving averages with negative MACD). These are partially offset by strong reported profitability, an attractive valuation (moderate P/E with a high dividend yield), and an earnings update indicating solid liquidity and pipeline strength despite elevated leverage and unrealized losses.
Positive Factors
Net investment income & profitability
Consistent quarterly net investment income and very high reported net margins indicate durable earnings power from interest and fee income. This supports dividend coverage and provides a buffer to absorb credit markdowns or funding cost variability over the next several quarters.
Robust near-term pipeline
A vetted late-stage pipeline >$100M and recent net originations demonstrate repeatable deal flow and origination capability in the lower middle market. Sustained origination activity helps stabilize yields and asset growth over months, reducing reliance on secondary markets to deploy capital.
Strong liquidity & funding flexibility
Material revolver availability plus management actions to cut commitment fees and align floating-rate borrowings improve funding flexibility. This durable liquidity and lower run-rate funding cost provide capacity to weather rate moves, support originations, and defend distributions.
Negative Factors
Inconsistent cash generation
Wide swings and recent negative TTM operating cash flow signal fragile cash earnings quality versus accrual profits. Over months this pressures self-funding of distributions and loan repayments, increasing dependence on revolver draws or new financing during adverse periods.
Elevated leverage
High leverage relative to equity reduces loss-absorption capacity and magnifies earnings sensitivity to yield compression or credit impairments. Persistently elevated leverage increases refinancing and covenant risk if originations slow or portfolio mark-to-market pressure rises over the medium term.
Concentrated unrealized losses
Concentration of unrealized depreciation across a few credits — including those facing operational disruptions or management changes — signals idiosyncratic credit risk. If remediation stalls, further markdowns or non-accruals could impair NAV and constrain dividend sustainability.
Gladstone Capital (GLAD) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$409.39M
Dividend Yield9.31%
Average Volume (3M)195.32K
Price to Earnings (P/E)12.0
Beta (1Y)0.69
Revenue Growth41.12%
EPS Growth-40.68%
CountryUS
Employees73
SectorFinancial
Sector Strength70
IndustryAsset Management
Share Statistics
EPS (TTM)0.50
Shares Outstanding22,593,070
10 Day Avg. Volume208,363
30 Day Avg. Volume195,318
Financial Highlights & Ratios
PEG Ratio-0.21
Price to Book (P/B)1.01
Price to Sales (P/S)3.38
P/FCF Ratio11.21
Enterprise Value/Market Cap1.48
Enterprise Value/Revenue10.37
Enterprise Value/Gross Profit16.25
Enterprise Value/Ebitda16.47
Forecast
1Y Price Target
$21.67Price Target Upside17.20% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering3
EPS Forecast (FY)1.92
Revenue Forecast (FY)$99.57M
Gladstone Capital Business Overview & Revenue Model
Company DescriptionGladstone 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.
How the Company Makes MoneyGladstone Capital makes money primarily through the interest income generated from its portfolio of debt investments, which includes senior and subordinated loans. These loans are extended to small and medium-sized businesses, and the interest payments received form a significant portion of the company's revenue. In addition to interest income, Gladstone Capital also earns money through capital gains realized from the sale of equity investments and loan prepayments. The company may also charge fees related to the structuring and management of its investment deals. Furthermore, Gladstone Capital benefits from its strategic partnerships and relationships with financial institutions, which can provide additional investment opportunities and funding sources. The company's performance is influenced by factors such as interest rate fluctuations, credit risk management, and the overall economic environment affecting its portfolio companies.
Gladstone Capital Earnings Call Summary
Earnings Call Date:Feb 04, 2026
(Q1-2026)
| % Change Since: |
Next Earnings Date:May 05, 2026
Earnings Call Sentiment Positive
The call presented a number of tangible positives: solid quarterly fundings and net originations, a robust late-stage pipeline (> $100M), improved liquidity ($150M+ available on a $365M revolver), modest growth in interest income, an $11.3M net investment income result, and management actions to reduce funding costs and align floating-rate borrowings to asset sensitivity. Offsetting these positives are meaningful unrealized losses of $5.3M concentrated in a few credits, a modest decline in NAV, rising PIK exposure in select positions, increased expenses, and elevated leverage (~93% of net assets). Management articulated clear mitigation levers for rate declines and portfolio remediation plans, and the balance of news suggests the company is fundamentally stable with manageable near-term headwinds rather than structural deterioration.Q1-2026 Updates
Positive Updates
Strong Fundings and Net Originations
Fundings for the quarter totaled $99.1 million, including two new private-equity sponsored investments totaling $37.8 million and $61.3 million of additional advances to existing portfolio companies. Exits and prepayments were $52.8 million, resulting in net originations of $46.3 million for the quarter.
Robust Near-Term Pipeline
Management reported a late-stage pipeline in excess of $100 million (vetted, awarded, or in diligence/documentation), expected to more than offset recent repayments and support continued originations.
Interest Income and Asset Growth
Interest income rose to $23.9 million (up $0.1 million or ~1%), driven by average earning assets rising $20.3 million (up ~3%), with a weighted average debt yield of 12.2% for the period.
Net Investment Income and EPS
Net investment income was $11.3 million, or $0.50 per share, and the net increase in net assets from operations was $5.5 million, or $0.24 per share for the quarter.
Strong Liquidity and Borrowing Availability
Total credit facility of $365 million with borrowing availability in excess of $150 million after repayments, and management increased floating-rate borrowings to better match asset sensitivity.
Balance Sheet Size and Investment Base
Total assets increased to $923 million with $903 million in investments at fair value and $20 million in cash and other assets, demonstrating a sizeable investment base.
Dividend Run Rate and Yield
Monthly distributions of $0.15 for February and March imply an annual run rate of $1.80 per share; at the recent common share price (~$20.44) this produces a yield of ~8.8%.
Improved Funding Cost Position
Management reduced commitment fee run-rate materially (from ~$2.6 million last year to roughly ~$1 million presently), generating roughly $1.6 million in annualized savings and helping offset potential margin compression.
Notable Prepayment Recovery
Post-quarter the company experienced a significant prepayment from Vets Choice of $42.8 million, which generated a prepayment fee of $855,000 and increased available liquidity.
Negative Updates
Unrealized Losses Increased
Unrealized losses rose to $5.3 million for the quarter, concentrated in three investment positions impacted by a recent government shutdown or where senior management has been replaced and improvements are expected in 2026.
Decline in Net Assets and NAV
Net assets declined $4.7 million to $477 million and NAV per share decreased from $21.34 to $21.13 (a decline of $0.21 or ~0.98%) for the quarter.
PIK Income and Accumulation
PIK income rose to $2.3 million, representing 9.6% of interest income. Although $2.8 million of PIK was collected during the period (reducing accrued PIK), the increase in PIK highlights pockets of cash-flow flexibility/stress in select credits.
Expense Growth
Total expenses increased by $800,000 (up ~6% quarter-over-quarter) driven by $200,000 higher interest expense and $600,000 higher net management fees associated with higher average investments and lower origination fee credits.
Write-off Related to Refinancing
There was a $1.4 million write-off associated with unamortized costs from a note refinancing last quarter, which partially offset realized gains.
High Leverage Ratios
Gross leverage/net debt levels are elevated: management reported net debt at approximately 93% of NAV and gross leverage of 93.3% of net assets as of quarter-end, indicating leverage is high relative to equity.
Rate Sensitivity Risk
Weighted average yield declined 30 basis points to 12.2%. Management estimated rate sensitivity of roughly $2.4 million decline in net interest income for a 50-basis-point SOFR decline and about $5.3 million for a 100-basis-point decline. Average floors are near ~1.20–1.25% which limits downside but still creates exposure if base rates fall significantly.
Portfolio Company Operational Challenges
Select portfolio companies face operational and seasonal headwinds (e.g., a QSR business with seasonal weakness and local disruptions, and a dredging contractor impacted by a government shutdown), plus management transitions in a few credits—these have contributed to unrealized depreciation and require active remediation.
Dilution Disclosure Related to Convertible Debt
Diluted share count increased materially due to accounting for convertible debt under the treasury-stock method; while management expects this to be largely a disclosure effect, it highlights convertible instruments that could be dilutive in reporting.
Company Guidance
The company’s guidance emphasized balance-sheet flexibility and rate-sensitivity management: with fundings of $99.1M last quarter (two new PE‑sponsored investments of $37.8M plus $61.3M of add‑on advances), exits/prepayments of $52.8M and net originations of $46.3M, management expects a late‑stage pipeline of over $100M to more than offset recent repayments; quarter metrics included interest income of $23.9M on a weighted average yield of 12.2%, net investment income of $11.3M (~$0.50/share) and a net increase from operations of $5.5M ($0.24/share), total assets of $923M (investments $903M fair value), liabilities $445M, net assets $477M (NAV $21.13), gross leverage ~93.3% of net assets, a $365M credit facility with >$150M available, monthly distributions of $0.15 (annualized $1.80, ~8.8% yield at ~$20.44/share), PIK income $2.3M (9.6% of interest income) with $2.8M collected, three non‑earning debt investments cost $28.8M (fair value $13.2M, ~1.6%), $300k realized gains and $5.3M unrealized losses, a post‑quarter $42.8M prepayment (Vets Choice) with an $855k fee and a $6M new senior debt funding — and management believes it can absorb roughly a 50–75 bps SOFR decline (sensitivity roughly $2.4M per 50 bps, ~$5.3M per 100 bps) by increasing revolver usage, realizing commitment‑fee savings (prior run‑rate ~$2.6M vs current ~$1M), and closing new originations to support the dividend.Gladstone Capital Financial Statement Overview
Summary
Strong reported profitability with very high net margins, and leverage has improved versus FY2022. However, revenue growth is volatile with a TTM revenue decline (~-13%), and cash generation is a key weakness with highly inconsistent operating/free cash flow and recent TTM negative operating cash flow (~-$71.5M).Income Statement
Profitability is strong on the face of the income statement, with very high margins across the period and solid earnings generation (TTM (Trailing-Twelve-Months) net margin ~75%; FY2024 net margin ~79%). Revenue growth, however, is volatile—strong expansion in FY2023–FY2024, modest growth in FY2025 annual data, then a decline in TTM (Trailing-Twelve-Months) revenue (about -13%). Overall, GLAD shows attractive profitability but a less consistent growth trajectory.72
Positive
Balance Sheet
Leverage looks manageable but meaningful for the business model, with debt-to-equity around ~0.83 in the most recent periods (improved from ~1.08 in FY2022). Equity and assets have generally grown over time, supporting balance-sheet scale. Returns on equity are positive and decent (roughly low-teens recently, higher in FY2021–FY2024), but leverage remains a key risk factor if earnings or portfolio performance weakens.63
Positive
Cash Flow
Cash generation is the weak spot. Operating and free cash flow swing materially, including large negatives in FY2021, FY2022, FY2023, and again in TTM (Trailing-Twelve-Months) (operating cash flow about -$71.5M). While FY2025 annual data shows strong positive operating cash flow (~$43.6M), the overall pattern is inconsistent, and recent TTM (Trailing-Twelve-Months) negative cash flow raises concerns about cash earnings quality and funding needs during weaker periods.38
Negative
| Breakdown | TTM | Sep 2025 | Sep 2024 | Sep 2023 | Sep 2022 | Sep 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 58.56M | 144.76M | 120.26M | 65.83M | 33.03M | 97.55M |
| Gross Profit | 37.39M | 126.33M | 98.55M | 44.98M | 20.06M | 86.04M |
| EBITDA | 36.89M | 122.28M | 94.72M | 42.67M | 19.91M | 84.30M |
| Net Income | 36.89M | 58.11M | 94.72M | 42.67M | 19.91M | 84.30M |
Balance Sheet | ||||||
| Total Assets | 922.81M | 907.60M | 812.47M | 719.50M | 660.97M | 566.50M |
| Cash, Cash Equivalents and Short-Term Investments | 2.92M | 32.37M | 2.17M | 1.31M | 2.01M | 671.00K |
| Total Debt | 192.70M | 397.86M | 324.61M | 300.91M | 339.41M | 237.11M |
| Total Liabilities | 416.34M | 425.56M | 333.73M | 310.80M | 345.48M | 248.06M |
| Stockholders Equity | 506.47M | 482.04M | 478.74M | 408.69M | 315.49M | 318.44M |
Cash Flow | ||||||
| Free Cash Flow | -22.98M | 43.63M | 3.24M | -10.86M | -76.40M | -14.06M |
| Operating Cash Flow | -22.98M | 43.63M | 3.24M | -10.86M | -76.40M | -14.06M |
| Investing Cash Flow | -40.31M | -49.12M | 0.00 | 0.00 | -259.05M | -165.99M |
| Financing Cash Flow | 65.58M | 35.55M | -2.34M | 10.15M | 77.66M | 12.44M |
Gladstone Capital Technical Analysis
Negative
18.49
Price Trends
19.94
Negative
19.71
Negative
22.30
Negative
Market Momentum
-0.56
Positive
30.29
Neutral
15.89
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For GLAD, the sentiment is Negative. The current price of 18.49 is below the 20-day moving average (MA) of 19.15, below the 50-day MA of 19.94, and below the 200-day MA of 22.30, indicating a bearish trend. The MACD of -0.56 indicates Positive momentum. The RSI at 30.29 is Neutral, neither overbought nor oversold. The STOCH value of 15.89 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for GLAD.
Gladstone Capital Risk Analysis
Gladstone Capital disclosed 61 risk factors in its most recent earnings report. Gladstone Capital reported the most risks in the "Finance & Corporate" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Gladstone Capital Peers Comparison
UnderperformOutperform
Sector (68)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
68 Neutral | $18.00B | 11.42 | 9.92% | 3.81% | 9.73% | 1.22% | |
63 Neutral | $476.46M | 13.34 | 4.92% | 13.20% | -20.18% | -61.90% | |
63 Neutral | $435.07M | 16.56 | 3.22% | 15.77% | -11.01% | -65.56% | |
61 Neutral | $552.33M | 4.46 | 22.16% | 11.02% | -45.46% | 134.73% | |
59 Neutral | $409.39M | 12.01 | 7.40% | 9.31% | 41.12% | -40.68% | |
59 Neutral | $325.17M | 12.50 | 5.38% | 16.61% | -3.09% | 200.66% | |
50 Neutral | $384.33M | ― | -1.15% | 21.13% | -91.81% | 78.46% |
* Financial Sector Average
GLAD
Gladstone Capital
18.49
-7.63
-29.21%
GAIN
Gladstone Investment
14.13
1.93
15.82%
PNNT
Pennantpark Investment
5.14
-1.02
-16.61%
TCPC
BlackRock TCP Capital
4.62
-3.33
-41.89%
CCAP
Crescent Capital BDC
13.27
-3.27
-19.77%
CION
CION Investment Corp
8.48
-1.97
-18.85%
Gladstone Capital Corporate Events
Executive/Board ChangesShareholder Meetings
Gladstone Capital stockholders approve directors and auditor
Positive
Feb 5, 2026
On February 5, 2026, Gladstone Capital Corporation held its 2026 Annual Meeting of Stockholders, with common and preferred shareholders represented in person or by proxy. At the meeting, preferred shareholders elected Michela A. English and Anthony W. Parker as directors to serve until the 2029 Annual Meeting, and stockholders ratified the Audit Committee’s selection of PricewaterhouseCoopers LLP as the company’s independent registered public accounting firm for the fiscal year ending September 30, 2026, reinforcing continuity in the board’s composition and the company’s external audit oversight.
The most recent analyst rating on (GLAD) stock is a Hold with a $22.00 price target. To see the full list of analyst forecasts on Gladstone Capital stock, see the GLAD Stock Forecast page.
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.