New Mountain Finance (NASDAQ:NMFC – Get Free Report) and Bain Capital Specialty Finance (NYSE:BCSF – Get Free Report) are both small-cap finance companies, but which is the superior stock? We will compare the two companies based on the strength of their dividends, valuation, analyst recommendations, risk, institutional ownership, earnings and profitability.
Dividends
New Mountain Finance pays an annual dividend of $1.28 per share and has a dividend yield of 15.9%. Bain Capital Specialty Finance pays an annual dividend of $1.68 per share and has a dividend yield of 12.6%. New Mountain Finance pays out -220.7% of its earnings in the form of a dividend. 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. Bain Capital Specialty Finance has raised its dividend for 4 consecutive years. New Mountain Finance is clearly the better dividend stock, given its higher yield and lower payout ratio.
Valuation & Earnings
This table compares New Mountain Finance and Bain Capital Specialty Finance”s revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| New Mountain Finance | $327.08 million | 2.33 | $16.49 million | ($0.58) | -13.91 |
| Bain Capital Specialty Finance | $273.24 million | 3.16 | $98.76 million | $1.53 | 8.70 |
Bain Capital Specialty Finance has lower revenue, but higher earnings than New Mountain Finance. New Mountain Finance is trading at a lower price-to-earnings ratio than Bain Capital Specialty Finance, indicating that it is currently the more affordable of the two stocks.
Analyst Ratings
This is a breakdown of current ratings and recommmendations for New Mountain Finance and Bain Capital Specialty Finance, as reported by MarketBeat.com.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| New Mountain Finance | 1 | 6 | 0 | 0 | 1.86 |
| Bain Capital Specialty Finance | 0 | 2 | 1 | 0 | 2.33 |
New Mountain Finance presently has a consensus price target of $9.25, suggesting a potential upside of 14.62%. Bain Capital Specialty Finance has a consensus price target of $14.00, suggesting a potential upside of 5.18%. Given New Mountain Finance’s higher probable upside, equities research analysts clearly believe New Mountain Finance is more favorable than Bain Capital Specialty Finance.
Risk & Volatility
New Mountain Finance has a beta of 0.57, meaning that its stock price is 43% less volatile than the S&P 500. Comparatively, Bain Capital Specialty Finance has a beta of 0.59, meaning that its stock price is 41% less volatile than the S&P 500.
Profitability
This table compares New Mountain Finance and Bain Capital Specialty Finance’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| New Mountain Finance | -18.65% | 11.14% | 4.63% |
| Bain Capital Specialty Finance | 36.14% | 10.74% | 4.51% |
Institutional and Insider Ownership
32.1% of New Mountain Finance shares are held by institutional investors. 14.9% of New Mountain Finance shares are held by insiders. Comparatively, 0.6% of Bain Capital Specialty Finance shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.
Summary
Bain Capital Specialty Finance beats New Mountain Finance on 9 of the 17 factors compared between the two stocks.
About New Mountain Finance
New Mountain Finance Corporation (Nasdaq: NMFC), a business development company is a private equity / buyouts and loan fund specializes in directly investing and lending to middle market companies in defensive growth industries. The fund prefers investing in buyout and middle market companies. It also makes investments in debt securities at all levels of the capital structure including first and second lien debt, unsecured notes, and mezzanine securities. In some cases, its investments may also include equity interests. It targets energy, engineering and consulting services, specialty chemicals and materials, trading companies and distributors, commercial printing, diversified support services, education services, environmental and facilities services, office services and supplies, media, distributors, health care services, health care facilities, application software, business services, systems software, federal services, distribution and logistics, interactive home entertainment, telecommunication services, hydroelectric power generation, electric power generation by fossil fuels, electric power generation by nuclear fuels, health care technology, and security and alarm services. The fund seeks to invest in United States of America. It seeks to invest between $10 million and $125 million per transaction. The firm invests through both primary originations and open-market secondary purchases. It invests in companies with EBITDA between $10 million and $200 million. The fund seeks a majority stake in its portfolio companies.
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.
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