Analyzing Morgan Stanley Direct Lending Fund (NYSE:MSDL) and Barings Bdc (NYSE:BBDC)

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

Dividends

Barings Bdc pays an annual dividend of $1.04 per share and has a dividend yield of 12.5%. Morgan Stanley Direct Lending Fund pays an annual dividend of $2.00 per share and has a dividend yield of 13.7%. Barings Bdc pays out 107.2% 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. Barings Bdc has raised its dividend for 3 consecutive years.

Earnings & Valuation

This table compares Barings Bdc and Morgan Stanley Direct Lending Fund”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Barings Bdc	$279.21 million	3.12	$101.92 million	$0.97	8.57
Morgan Stanley Direct Lending Fund	$397.29 million	3.15	$122.09 million	$1.40	10.45

Morgan Stanley Direct Lending Fund has higher revenue and earnings than Barings Bdc. Barings Bdc 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 Ratings

This is a summary of recent ratings and recommmendations for Barings Bdc and Morgan Stanley Direct Lending Fund, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Barings Bdc	0	2	2	0	2.50
Morgan Stanley Direct Lending Fund	0	6	1	0	2.14

Barings Bdc presently has a consensus target price of $9.67, suggesting a potential upside of 16.26%. Morgan Stanley Direct Lending Fund has a consensus target price of $15.58, suggesting a potential upside of 6.51%. Given Barings Bdc’s stronger consensus rating and higher probable upside, research analysts clearly believe Barings Bdc is more favorable than Morgan Stanley Direct Lending Fund.

Profitability

This table compares Barings Bdc and Morgan Stanley Direct Lending Fund’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Barings Bdc	36.50%	10.05%	4.27%
Morgan Stanley Direct Lending Fund	30.73%	9.88%	4.49%

Institutional and Insider Ownership

44.1% of Barings Bdc shares are held by institutional investors. 0.6% of Barings Bdc shares are held by insiders. Comparatively, 0.2% of Morgan Stanley Direct Lending Fund shares are held by insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a company will outperform the market over the long term.

Risk and Volatility

Barings Bdc has a beta of 0.6, meaning that its share price is 40% less volatile than the S&P 500. Comparatively, Morgan Stanley Direct Lending Fund has a beta of 0.35, meaning that its share price is 65% less volatile than the S&P 500.

Summary

Barings Bdc beats Morgan Stanley Direct Lending Fund on 10 of the 17 factors compared between the two stocks.

About Barings Bdc

Barings BDC, Inc. is a publicly traded, externally managed investment company that has elected to be treated as a business development company under the Investment Company Act of 1940. It seeks to invest primarily in senior secured loans, first lien debt, unitranche, second lien debt, subordinated debt, equity co-investments and senior secured private debt investments in private middle-market companies that operate across a wide range of industries. It specializes in mezzanine, leveraged buyouts, management buyouts, ESOPs, change of control transactions, acquisition financings, growth financing, and recapitalizations in lower middle market, mature, and later stage companies. It invests in manufacturing and distribution; business services and technology; transportation and logistics; consumer product and services. It invests in United States. It invests in companies with EBITDA of $10 million to $75 million, typically in private equity sponsor backed.

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.