Hennessy Advisors (NASDAQ:HNNA – Get Free Report) and New Mountain Finance (NASDAQ:NMFC – Get Free Report) are both small-cap finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their risk, dividends, profitability, earnings, valuation, institutional ownership and analyst recommendations.
Risk & Volatility
Hennessy Advisors has a beta of 0.48, suggesting that its stock price is 52% less volatile than the S&P 500. Comparatively, New Mountain Finance has a beta of 0.58, suggesting that its stock price is 42% less volatile than the S&P 500.
Analyst Ratings
This is a summary of recent ratings and price targets for Hennessy Advisors and New Mountain Finance, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Hennessy Advisors | 0 | 1 | 0 | 0 | 2.00 |
| New Mountain Finance | 2 | 4 | 0 | 0 | 1.67 |
New Mountain Finance has a consensus price target of $7.50, indicating a potential upside of 12.44%. Given New Mountain Finance’s higher possible upside, analysts plainly believe New Mountain Finance is more favorable than Hennessy Advisors.
Dividends
Hennessy Advisors pays an annual dividend of $0.60 per share and has a dividend yield of 6.0%. New Mountain Finance pays an annual dividend of $1.00 per share and has a dividend yield of 15.0%. Hennessy Advisors pays out 57.7% of its earnings in the form of a dividend. New Mountain Finance pays out -185.2% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. New Mountain Finance is clearly the better dividend stock, given its higher yield and lower payout ratio.
Earnings & Valuation
This table compares Hennessy Advisors and New Mountain Finance”s top-line revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Hennessy Advisors | $35.54 million | 2.24 | $9.96 million | $1.04 | 9.69 |
| New Mountain Finance | $327.08 million | 1.93 | $16.49 million | ($0.54) | -12.35 |
New Mountain Finance has higher revenue and earnings than Hennessy Advisors. New Mountain Finance is trading at a lower price-to-earnings ratio than Hennessy Advisors, indicating that it is currently the more affordable of the two stocks.
Institutional & Insider Ownership
10.3% of Hennessy Advisors shares are owned by institutional investors. Comparatively, 32.1% of New Mountain Finance shares are owned by institutional investors. 36.0% of Hennessy Advisors shares are owned by insiders. Comparatively, 14.9% of New Mountain Finance shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.
Profitability
This table compares Hennessy Advisors and New Mountain Finance’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Hennessy Advisors | 24.77% | 8.31% | 5.48% |
| New Mountain Finance | -21.29% | 10.71% | 4.55% |
Summary
New Mountain Finance beats Hennessy Advisors on 8 of the 15 factors compared between the two stocks.
About Hennessy Advisors
Hennessy Advisors, Inc. is an investment management company that provides portfolio management, investment advisory and related services. Through its Hennessy Funds business, the company offers a range of investment products designed for individual investors, financial professionals and institutions. The company’s offerings have included actively managed mutual funds and exchange-traded funds covering equities, fixed income and specialized investment strategies. Its portfolios may focus on areas such as large- and small-capitalization companies, financial services, technology, utilities, international markets and other targeted segments.
About New Mountain Finance
New Mountain Finance Corporation is a business development company that provides financing to U.S. middle-market businesses. It is externally managed by an affiliate of New Mountain Capital, an alternative investment manager. The company primarily invests in senior secured loans, along with other debt investments and, in some cases, equity securities. Its financing supports businesses across a range of industries and may be used for purposes such as growth, acquisitions, refinancing, or ownership changes.
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