Financial Analysis: New Mountain Finance Corporation (NMFC) versus BlackRock Capital Investment Corporation (BKCC)

New Mountain Finance Corporation (NYSE: NMFC) and BlackRock Capital Investment Corporation (NASDAQ:BKCC) are both finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their profitability, institutional ownership, risk, valuation, analyst recommendations, dividends and earnings.

Dividends

New Mountain Finance Corporation pays an annual dividend of $1.36 per share and has a dividend yield of 9.9%. BlackRock Capital Investment Corporation pays an annual dividend of $0.72 per share and has a dividend yield of 9.9%. New Mountain Finance Corporation pays out 86.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. BlackRock Capital Investment Corporation pays out -1,028.6% of its earnings in the form of a dividend. BlackRock Capital Investment Corporation is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional & Insider Ownership

40.8% of New Mountain Finance Corporation shares are owned by institutional investors. Comparatively, 29.0% of BlackRock Capital Investment Corporation shares are owned by institutional investors. 9.7% of New Mountain Finance Corporation shares are owned by insiders. Comparatively, 1.3% of BlackRock Capital Investment Corporation shares are owned by 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 and Valuation

This table compares New Mountain Finance Corporation and BlackRock Capital Investment Corporation’s gross revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
New Mountain Finance Corporation N/A N/A N/A $1.57 8.73
BlackRock Capital Investment Corporation N/A N/A N/A ($0.07) -103.57

BlackRock Capital Investment Corporation is trading at a lower price-to-earnings ratio than New Mountain Finance Corporation, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a breakdown of recent ratings and price targets for New Mountain Finance Corporation and BlackRock Capital Investment Corporation, as reported by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
New Mountain Finance Corporation 0 1 0 0 2.00
BlackRock Capital Investment Corporation 0 1 0 0 2.00

New Mountain Finance Corporation currently has a consensus price target of $15.00, suggesting a potential upside of 9.49%. BlackRock Capital Investment Corporation has a consensus price target of $8.00, suggesting a potential upside of 10.34%. Given BlackRock Capital Investment Corporation’s higher probable upside, analysts clearly believe BlackRock Capital Investment Corporation is more favorable than New Mountain Finance Corporation.

Profitability

This table compares New Mountain Finance Corporation and BlackRock Capital Investment Corporation’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
New Mountain Finance Corporation 65.22% 10.15% 5.38%
BlackRock Capital Investment Corporation -5.04% 7.20% 4.51%

Risk and Volatility

New Mountain Finance Corporation has a beta of 0.58, meaning that its stock price is 42% less volatile than the S&P 500. Comparatively, BlackRock Capital Investment Corporation has a beta of 0.85, meaning that its stock price is 15% less volatile than the S&P 500.

Summary

New Mountain Finance Corporation beats BlackRock Capital Investment Corporation on 6 of the 10 factors compared between the two stocks.

About New Mountain Finance Corporation

New Mountain Finance Corporation is a closed-end, non-diversified management investment company. The Company’s investment objective is to generate current income and capital appreciation through the sourcing and origination of debt securities at all levels of the capital structure, including first and second lien debt, notes, bonds and mezzanine securities. Its investments may also include equity interests, such as preferred stock, common stock, warrants or options received in connection with its debt investments or may include a direct investment in the equity of private companies. The Company makes investments through both primary originations and open-market secondary purchases. Its investment portfolio includes its investments in various industries, such as business services, software, consumer services, investment fund, education, energy, healthcare services, distribution and logistics, and Federal services. Its investment advisor is New Mountain Finance Advisers BDC, L.L.C.

About BlackRock Capital Investment Corporation

BlackRock Capital Investment Corporation is an externally-managed, non-diversified, closed-end management investment company. The Company’s investment objective is to generate both current income and capital appreciation through its debt and equity investments. The Company provides middle-market companies with a range of financing solutions, including senior and junior secured, unsecured and subordinated debt securities and loans, and equity securities. Its targeted investment typically ranges between $10 million and $50 million. The Company generally seeks to invest in companies that operate in a range of industries. The Company’s investments are in senior and junior secured, unsecured and subordinated loans to the United States private and certain public middle-market companies. The Company’s investment advisor is BlackRock Advisors, LLC.

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