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

Risk and Volatility

New Mountain Finance Corporation has a beta of 0.58, indicating that its share price is 42% less volatile than the S&P 500. Comparatively, OFS Capital Corporation has a beta of 0.47, indicating that its share price is 53% less volatile than the S&P 500.

Institutional & Insider Ownership

40.8% of New Mountain Finance Corporation shares are held by institutional investors. Comparatively, 28.7% of OFS Capital Corporation shares are held by institutional investors. 9.7% of New Mountain Finance Corporation shares are held by company insiders. Comparatively, 0.0% of OFS Capital Corporation shares are held by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock will outperform the market over the long term.

Analyst Ratings

This is a summary of current recommendations for New Mountain Finance Corporation and OFS Capital Corporation, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
New Mountain Finance Corporation 0 1 0 0 2.00
OFS Capital Corporation 1 1 3 0 2.40

New Mountain Finance Corporation presently has a consensus price target of $15.00, indicating a potential upside of 9.49%. OFS Capital Corporation has a consensus price target of $14.25, indicating a potential upside of 8.28%. Given New Mountain Finance Corporation’s higher possible upside, research analysts plainly believe New Mountain Finance Corporation is more favorable than OFS Capital Corporation.

Profitability

This table compares New Mountain Finance Corporation and OFS Capital 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%
OFS Capital Corporation 31.02% 9.43% 4.69%

Earnings & Valuation

This table compares New Mountain Finance Corporation and OFS Capital Corporation’s 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
OFS Capital Corporation N/A N/A N/A $1.08 12.19

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

Dividends

New Mountain Finance Corporation pays an annual dividend of $1.36 per share and has a dividend yield of 9.9%. OFS Capital Corporation pays an annual dividend of $1.36 per share and has a dividend yield of 10.3%. 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. OFS Capital Corporation pays out 125.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Summary

New Mountain Finance Corporation beats OFS Capital Corporation on 9 of the 12 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 OFS Capital Corporation

OFS Capital Corporation (OFS Capital) is an externally managed, closed-end, non-diversified management investment company. The Company’s investment objective is to provide its shareholders with both current income and capital appreciation primarily through debt investments and equity investments. It focuses primarily on middle-market companies in the United States, including senior secured loans, including first-lien, second-lien and unitranche loans, as well as subordinated loans, and warrants and other minority equity securities. The Company may make investments directly or through OFS SBIC I, LP (SBIC I LP), its investment company subsidiary. It focuses on investments in loans, in which OFS Advisor’s investment professionals have expertise, including investments in first-lien, unitranche, second-lien, and mezzanine loans and, to a lesser extent, on warrants and other equity securities. The Company’s investment activities are managed by OFS Capital Management, LLC (OFS Advisor).

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