Palmer Square Capital BDC (NYSE:PSBD – Get Free Report) and New Mountain Finance (NASDAQ:NMFC – Get Free Report) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their profitability, earnings, analyst recommendations, valuation, institutional ownership, dividends and risk.
Profitability
This table compares Palmer Square Capital BDC and New Mountain Finance’s net margins, return on equity and return on assets.
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Insider & Institutional Ownership
6.5% of Palmer Square Capital BDC shares are held by institutional investors. Comparatively, 32.1% of New Mountain Finance shares are held by institutional investors. 1.0% of Palmer Square Capital BDC shares are held by company insiders. Comparatively, 11.7% of New Mountain Finance shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.
Earnings & Valuation
This table compares Palmer Square Capital BDC and New Mountain Finance”s top-line revenue, earnings per share and valuation.
New Mountain Finance has higher revenue and earnings than Palmer Square Capital BDC. New Mountain Finance is trading at a lower price-to-earnings ratio than Palmer Square Capital BDC, indicating that it is currently the more affordable of the two stocks.
Volatility and Risk
Palmer Square Capital BDC has a beta of 0.82, indicating that its stock price is 18% less volatile than the S&P 500. Comparatively, New Mountain Finance has a beta of 0.8, indicating that its stock price is 20% less volatile than the S&P 500.
Dividends
Palmer Square Capital BDC pays an annual dividend of $1.44 per share and has a dividend yield of 11.7%. New Mountain Finance pays an annual dividend of $1.28 per share and has a dividend yield of 13.3%. Palmer Square Capital BDC pays out 257.1% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. New Mountain Finance pays out 168.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. New Mountain Finance is clearly the better dividend stock, given its higher yield and lower payout ratio.
Analyst Ratings
This is a summary of current ratings and target prices for Palmer Square Capital BDC and New Mountain Finance, as reported by MarketBeat.
Palmer Square Capital BDC currently has a consensus price target of $14.38, indicating a potential upside of 16.35%. New Mountain Finance has a consensus price target of $10.60, indicating a potential upside of 9.84%. Given Palmer Square Capital BDC’s stronger consensus rating and higher possible upside, equities analysts clearly believe Palmer Square Capital BDC is more favorable than New Mountain Finance.
Summary
New Mountain Finance beats Palmer Square Capital BDC on 9 of the 16 factors compared between the two stocks.
About Palmer Square Capital BDC
(Get Free Report)
Palmer Square Capital BDC Inc. is an externally managed, non-diversified closed-end management investment company which primarily lends to and invests in corporate debt securities, including small to large private U.S. companies and has elected to be regulated as a business development company. Palmer Square Capital BDC Inc. is based in MISSION WOODS, Kan.
About New Mountain Finance
(Get Free Report)
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.