GOLUB CAPITAL BDC, Inc. (GBDC) stock intrinsic value fair value estimate & owner earnings analysis

Golub Capital BDC is a publicly traded lender, externally managed by Golub Capital. It makes mostly senior secured loans to private-equity-backed middle-market companies and pays out nearly all of its income as dividends. At September 30, 2025 it held about $8.8 billion of investments, funded with roughly $4.9 billion of debt and $4.0 billion of shareholder equity (net asset value of $14.97 per share, which fell to $14.25 by June 30, 2026). Borrowers are spread across the US regions (Southeast, Mid-Atlantic, Midwest, West, Southwest) with smaller exposure to the UK, Canada and continental Europe. How we measured earnings. For a lender, reported operating cash flow mostly reflects loans acquired and repaid: it was negative $114 million in fiscal 2025 while the portfolio grew, which says nothing about earnings power. We therefore used net investment income (interest and fees less interest cost, management and incentive fees and other expenses) and subtracted realized loan losses, treating those losses as the cost of keeping the loan book intact, much as a manufacturer deducts maintenance spending. The company pays no stock-based compensation and has no meaningful capital spending. On that basis, earnings per share were about $1.05 (fiscal 2021), $1.27 (2022), $1.46 (2023), $1.51 (2024) and $1.22 (2025). Unrealized valuation changes are excluded. What changed. Earnings per share rose as interest rates climbed, then fell in fiscal 2025 (about 19%) for three reasons: base rates on its floating-rate loans started to fall, borrowing costs rose ($291 million of interest expense versus $212 million), and the January 2024 merger with Golub Capital BDC 3 added about 92 million shares. Fiscal 2024 also benefited from a one-time $27 million fee waiver. The three reported quarters of fiscal 2026 continue the trend: net investment income was $267 million for nine months versus $296 million a year earlier, and realized losses were $39 million; annualized, that is roughly $1.16 per share after losses. Nine-month unrealized markdowns were larger still (roughly $150 million by our arithmetic from reported totals), which is why net asset value per share dropped about 5%. We set the earnings level at $1.12 per share, reflecting the merged company at today's rates and losses, not the higher 2023-2024 figures. Growth reconciliation. Owner earnings per share fell about 19% in fiscal 2025; our base case assumes 0% growth in year 1 from a level below the fiscal 2025 result, so no reversal of the decline is assumed. We credit no growth: the company pays out its income, so adding earnings per share requires issuing new shares or a rate rise, and neither is something the business has secured. Base case, about $15.90 per share. Earnings hold at $1.12 per share for ten years. The evidence is the roughly 15-year record of Golub's lending platform (largely senior first-lien loans sourced from private-equity sponsors), non-accruals of only 0.6% of cost at September 30, 2025 (down from 1.7% a year earlier), and a debt-to-equity ratio of 1.25x, at the top of the company's 0.85x-1.25x target range. After year ten we fade earnings 2% a year, since only the demonstrated lending platform, not any specific loan, continues. Discounted at 6%. Bear case, about $9.20 per share. Base rates fall further and credit losses run at about twice recent levels, given that unrealized markdowns this year already exceed realized losses and some will likely be realized. Earnings per share drop to about $0.85 and then decline 3% a year as the portfolio is gradually shrunk and diluted by losses. Leverage of 1.25x debt to equity magnifies each loss. Bull case, about $19.50 per share. Interest income stabilizes at today's run rate (about $1.36 per share before losses) and realized losses return to the $0.15 to $0.25 per share seen in fiscal 2023, giving about $1.28 per share for ten years, then a 1% annual fade. What we left out. Portfolio growth funded by new equity or extra leverage, spread widening, and any rebound in interest rates are not counted, since none is secured. We also did not deduct debt from the valuation, since earnings are already after interest cost. What would make these estimates wrong. If markdowns reverse (net asset value per share is $14.25 and loans are marked at fair value, so this is plausible), earnings could sit closer to the bull case. If non-accruals, which stood at 0.6% of cost at year-end 2025, rise back above their 1.7% level of a year earlier, or the recent $150 million of markdowns turns into realized losses, the bear case becomes more likely. We found no going-concern issue. One loose end: fiscal 2020 earnings could not be put on the same loss-adjusted basis, so our series starts in fiscal 2021.