Stock Analysis & Valuation Goldman Sachs BDC, Inc. (GSBD)

• Previous Close: $9.42
• Sector Valuation Confidence Level: High

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	23.23	147
Intrinsic value (DCF)	8.86	-6
Graham-Dodd Method		n/a
Graham Formula		n/a

Strategic Investment Analysis

Company Overview

Goldman Sachs BDC, Inc. (NYSE: GSBD) is a leading business development company (BDC) managed by Goldman Sachs Asset Management, specializing in middle-market and mezzanine investments. The company provides flexible financing solutions, including secured and unsecured debt, as well as equity investments, to private U.S. companies with EBITDA between $5 million and $75 million. GSBD primarily targets investments ranging from $10 million to $75 million, focusing on capital appreciation and income generation. Operating in the financial services sector, GSBD benefits from Goldman Sachs' extensive credit expertise and deal-sourcing capabilities. With a market cap of ~$1.29B, the company plays a critical role in financing mid-sized businesses that may lack access to traditional bank lending. Its diversified portfolio spans multiple industries, reducing sector-specific risks while delivering consistent dividends to shareholders.

Investment Summary

Goldman Sachs BDC offers investors exposure to middle-market private credit with a strong institutional backing from Goldman Sachs. The company's diversified portfolio and disciplined underwriting provide stable returns, evidenced by its $1.83 annual dividend per share (yield ~10.5% as of latest data). However, risks include interest rate sensitivity due to its floating-rate loan portfolio and potential credit deterioration in economic downturns. With a beta of 0.77, GSBD exhibits lower volatility than the broader market, appealing to income-focused investors. The high debt-to-equity ratio (~1.5x) warrants monitoring, but Goldman Sachs' oversight mitigates some operational risks. Valuation appears reasonable at ~1x book value, though competition in private credit could pressure returns.

Competitive Analysis

GSBD differentiates itself through its affiliation with Goldman Sachs, which provides superior deal flow, credit analysis, and structuring capabilities compared to standalone BDCs. The company’s focus on unitranche and first-lien debt (representing ~85% of its portfolio) enhances recovery rates in defaults. Its middle-market specialization allows for higher yields than large corporate lenders, while Goldman’s brand attracts high-quality borrowers. However, GSBD faces stiff competition from larger BDCs like Ares Capital (ARCC) and FS KKR Capital (FSK), which have greater scale and lower funding costs. Unlike some peers, GSBD avoids riskier equity co-investments, prioritizing capital preservation. The BDC’s competitive edge lies in its ability to leverage Goldman’s proprietary research and syndication networks, though its smaller size limits its capacity to lead large transactions independently. Recent underperformance versus peers highlights execution risks in a crowded market.

Major Competitors

• Ares Capital Corporation (ARCC): ARCC is the largest BDC by market cap (~$11B), with unparalleled scale in middle-market lending. Its strengths include diversified funding sources and a lower cost of capital due to its size. However, its massive portfolio (~400 companies) may limit hands-on oversight compared to GSBD’s more concentrated approach. ARCC’s higher exposure to second-lien debt (vs. GSBD’s first-lien focus) increases risk.
• FS KKR Capital Corp. (FSK): FSK benefits from its KKR affiliation, similar to GSBD’s Goldman Sachs backing, but carries higher leverage (1.7x debt/equity vs. GSBD’s 1.5x). Its portfolio is more skewed toward software and tech services, whereas GSBD maintains broader industry diversification. FSK’s larger size allows for bigger check sizes but may reduce yield opportunities in niche segments.
• Hercules Capital, Inc. (HTGC): HTGC specializes in venture debt for growth-stage tech and life sciences firms, a higher-risk/higher-reward niche compared to GSBD’s traditional middle-market focus. Its tech concentration offers growth potential but lacks GSBD’s defensive industry mix. HTGC’s lower leverage (1.1x) provides more cushion in downturns.
• Main Street Capital Corporation (MAIN): MAIN emphasizes lower-middle-market companies (EBITDA <$20M), a segment GSBD largely avoids. Its internally managed structure reduces fees but lacks GSBD’s institutional resources. MAIN’s stellar dividend track record appeals to income investors, though its smaller deals limit diversification.