Head to Head Analysis: New Mountain Finance (NASDAQ:NMFC) and Palmer Square Capital BDC (NYSE:PSBD)

New Mountain Finance (NASDAQ:NMFC) and Palmer Square Capital BDC (NYSE:PSBD) are both small-cap finance companies, but which is the superior business? We will compare the two companies based on the strength of their risk, valuation, analyst recommendations, dividends, earnings, institutional ownership and profitability.

Analyst Ratings

This is a breakdown of recent recommendations for New Mountain Finance and Palmer Square Capital BDC, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
New Mountain Finance	1	4	0	0	1.80
Palmer Square Capital BDC	0	2	2	0	2.50

New Mountain Finance presently has a consensus target price of $10.60, indicating a potential upside of 9.84%. Palmer Square Capital BDC has a consensus target price of $14.38, indicating a potential upside of 16.35%. Given Palmer Square Capital BDC’s stronger consensus rating and higher possible upside, analysts plainly believe Palmer Square Capital BDC is more favorable than New Mountain Finance.

Profitability

This table compares New Mountain Finance and Palmer Square Capital BDC’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
New Mountain Finance	23.27%	10.43%	4.32%
Palmer Square Capital BDC	13.51%	10.91%	4.15%

Dividends

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 an annual dividend of $1.44 per share and has a dividend yield of 11.7%. 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. 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 is clearly the better dividend stock, given its higher yield and lower payout ratio.

Risk & Volatility

New Mountain Finance has a beta of 0.8, suggesting that its share price is 20% less volatile than the S&P 500. Comparatively, Palmer Square Capital BDC has a beta of 0.82, suggesting that its share price is 18% less volatile than the S&P 500.

Valuation and Earnings

This table compares New Mountain Finance and Palmer Square Capital BDC”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
New Mountain Finance	$371.67 million	2.76	$113.44 million	$0.76	12.70
Palmer Square Capital BDC	$143.51 million	2.77	$47.67 million	$0.56	22.06

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.

Institutional & Insider Ownership

32.1% of New Mountain Finance shares are held by institutional investors. Comparatively, 6.5% of Palmer Square Capital BDC shares are held by institutional investors. 11.7% of New Mountain Finance shares are held by insiders. Comparatively, 1.0% of Palmer Square Capital BDC shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock will outperform the market over the long term.

Summary

New Mountain Finance beats Palmer Square Capital BDC on 9 of the 16 factors compared between the two stocks.

About New Mountain Finance

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.

About Palmer Square Capital BDC

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.