Bain Capital Specialty Finance (NYSE:BCSF) and Morgan Stanley Direct Lending Fund (NYSE:MSDL) Head-To-Head Analysis

Bain Capital Specialty Finance (NYSE:BCSF) and Morgan Stanley Direct Lending Fund (NYSE:MSDL) are both small-cap finance companies, but which is the superior business? We will contrast the two businesses based on the strength of their valuation, institutional ownership, analyst recommendations, dividends, profitability, risk and earnings.

Profitability

This table compares Bain Capital Specialty Finance and Morgan Stanley Direct Lending Fund’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Bain Capital Specialty Finance	36.14%	10.74%	4.51%
Morgan Stanley Direct Lending Fund	30.73%	9.88%	4.49%

Dividends

Bain Capital Specialty Finance pays an annual dividend of $1.68 per share and has a dividend yield of 13.9%. Morgan Stanley Direct Lending Fund pays an annual dividend of $2.00 per share and has a dividend yield of 14.3%. Bain Capital Specialty Finance pays out 109.8% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Morgan Stanley Direct Lending Fund pays out 142.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Bain Capital Specialty Finance has raised its dividend for 4 consecutive years.

Risk and Volatility

Bain Capital Specialty Finance has a beta of 0.6, suggesting that its share price is 40% less volatile than the S&P 500. Comparatively, Morgan Stanley Direct Lending Fund has a beta of 0.34, suggesting that its share price is 66% less volatile than the S&P 500.

Valuation and Earnings

This table compares Bain Capital Specialty Finance and Morgan Stanley Direct Lending Fund”s revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Bain Capital Specialty Finance	$273.24 million	2.86	$98.76 million	$1.53	7.88
Morgan Stanley Direct Lending Fund	$397.29 million	3.02	$122.09 million	$1.40	10.01

Morgan Stanley Direct Lending Fund has higher revenue and earnings than Bain Capital Specialty Finance. Bain Capital Specialty Finance is trading at a lower price-to-earnings ratio than Morgan Stanley Direct Lending Fund, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of current recommendations for Bain Capital Specialty Finance and Morgan Stanley Direct Lending Fund, as provided by MarketBeat.com.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Bain Capital Specialty Finance	0	2	1	0	2.33
Morgan Stanley Direct Lending Fund	0	6	1	0	2.14

Bain Capital Specialty Finance presently has a consensus price target of $14.00, indicating a potential upside of 16.19%. Morgan Stanley Direct Lending Fund has a consensus price target of $15.58, indicating a potential upside of 11.19%. Given Bain Capital Specialty Finance’s stronger consensus rating and higher possible upside, equities research analysts clearly believe Bain Capital Specialty Finance is more favorable than Morgan Stanley Direct Lending Fund.

Summary

Bain Capital Specialty Finance beats Morgan Stanley Direct Lending Fund on 9 of the 14 factors compared between the two stocks.

About Bain Capital Specialty Finance

Bain Capital Specialty Finance, Inc. is business development company specializing in direct loans to middle-market companies. The fund seeks to invest in senior investments with a first or second lien on collateral, senior first lien, stretch senior, senior second lien, unitranche, mezzanine debt, junior securities, other junior investments, and secondary purchases of assets or portfolios that primarily consist of middle-market corporate debt. It typically invests in companies with EBITDA between $10 million and $150 million.

About Morgan Stanley Direct Lending Fund

Morgan Stanley Direct Lending Fund is a business development company. It is a non-diversified, externally managed specialty finance company focused on lending to middle-market companies. Morgan Stanley Direct Lending Fund is based in NEW YORK.