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On Thursday, Lucid (NASDAQ:LCID) Capital Markets initiated coverage on Gladstone Capital Corporation (NASDAQ:GLAD), currently valued at $548.87 million, with a Neutral rating and established a price target of $26.00. The firm’s analysis indicated that Gladstone Capital should trade at 121% of their fiscal year 2025 year-end Net Asset Value (NAV) estimate of $21.54. According to InvestingPro data, the company maintains a modest P/E ratio of 5.27 and boasts an overall financial health score of "GREAT."
The initiation of coverage comes in recognition of Gladstone Capital’s performance over the previous five years, during which the company generated the highest total return among publicly traded Business Development Companies (BDCs), achieving 89% versus the peer median of 27%. This robust return has been attributed to the company’s experienced management team, a consistent investment strategy in the lower middle market, and prudent portfolio management. InvestingPro data confirms this strong performance, highlighting that GLAD has maintained dividend payments for an impressive 25 consecutive years.
Despite acknowledging the company’s strong track record, Lucid Capital Markets believes the current valuation of Gladstone Capital’s shares is fair, with the stock trading close to its long-term average price-to-NAV (P/NAV) multiple of 116%. The analysts noted that for a more favorable view of the stock, they would seek a better entry point and greater economic certainty. Discover more detailed valuation insights and 7 additional key investment factors with a InvestingPro subscription, including exclusive Fair Value analysis and comprehensive financial health metrics.
The price target of $26.00 reflects a 7.6% dividend yield expectation based on the forecast for fiscal year 2025 regular dividends of $1.98. This is compared to an 8.1% dividend yield based on the current share price, while InvestingPro data shows the current dividend yield stands at 9.68%. In contrast, a peer group of externally-managed BDCs trades at a median P/NAV of 82% and offers a median dividend yield of 13.7%. Lucid Capital Markets’ stance on Gladstone Capital is thus cautious, pending a more opportune moment for investment and a clearer economic outlook.
In other recent news, Gladstone Capital Corporation reported its fourth-quarter 2025 financial results, revealing a mixed performance. The company experienced an 8.8% decline in total interest income, amounting to $21.3 million, while net investment income rose by 2.5% to $11.2 million. This indicates a strategic focus on lower middle market businesses despite the challenges. Additionally, the net asset value per share increased to $21.51, reflecting solid asset management. Looking ahead, Gladstone Capital anticipates heightened portfolio exits and repayments in the coming quarters, with plans to strategically redeploy exit proceeds. The company is also considering refinancing its 7.75% baby bond in September. Analyst commentary from firms such as Ladenburg Thalmann and Raymond (NSE:RYMD) James highlighted the company’s disciplined investment approach and robust activity levels. Despite potential challenges, including supply chain disruptions and macroeconomic pressures, Gladstone Capital remains committed to its strategic initiatives.
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