Morgan Stanley Direct Lending Fund (NYSE:MSDL) versus FS KKR Capital (NYSE:FSK) Critical Survey

FS KKR Capital (NYSE:FSK) and Morgan Stanley Direct Lending Fund (NYSE:MSDL) are both finance companies, but which is the better business? We will contrast the two businesses based on the strength of their analyst recommendations, dividends, profitability, risk, earnings, valuation and institutional ownership.

Institutional and Insider Ownership

36.3% of FS KKR Capital shares are owned by institutional investors. 0.3% of FS KKR Capital shares are owned by company insiders. Comparatively, 0.2% of Morgan Stanley Direct Lending Fund shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock will outperform the market over the long term.

Risk & Volatility

FS KKR Capital has a beta of 0.94, indicating that its stock price is 6% less volatile than the S&P 500. Comparatively, Morgan Stanley Direct Lending Fund has a beta of 0.25, indicating that its stock price is 75% less volatile than the S&P 500.

Dividends

FS KKR Capital pays an annual dividend of $2.56 per share and has a dividend yield of 17.3%. Morgan Stanley Direct Lending Fund pays an annual dividend of $2.00 per share and has a dividend yield of 11.8%. FS KKR Capital pays out 328.2% 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 103.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Analyst Ratings

This is a summary of recent ratings for FS KKR Capital and Morgan Stanley Direct Lending Fund, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
FS KKR Capital	0	8	0	0	2.00
Morgan Stanley Direct Lending Fund	1	3	3	0	2.29

FS KKR Capital currently has a consensus price target of $17.75, suggesting a potential upside of 19.80%. Morgan Stanley Direct Lending Fund has a consensus price target of $18.08, suggesting a potential upside of 6.91%. Given FS KKR Capital’s higher possible upside, equities analysts clearly believe FS KKR Capital is more favorable than Morgan Stanley Direct Lending Fund.

Earnings & Valuation

This table compares FS KKR Capital 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
FS KKR Capital	$1.72 billion	N/A	$585.00 million	$0.78	18.99
Morgan Stanley Direct Lending Fund	$172.27 million	8.53	$215.56 million	$1.93	8.76

FS KKR Capital has higher revenue and earnings than Morgan Stanley Direct Lending Fund. Morgan Stanley Direct Lending Fund is trading at a lower price-to-earnings ratio than FS KKR Capital, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares FS KKR Capital and Morgan Stanley Direct Lending Fund’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
FS KKR Capital	13.24%	6.24%	2.75%
Morgan Stanley Direct Lending Fund	42.65%	11.24%	5.28%

Summary

FS KKR Capital beats Morgan Stanley Direct Lending Fund on 8 of the 15 factors compared between the two stocks.

About FS KKR Capital

FS KKR Capital Corp. is a business development company specializing in investments in debt securities. It provides customized credit solutions to private middle market U.S. companies. It invest primarily in the senior secured debt and, to a lesser extent, the subordinated debt of private middle market U.S. companies. It seeks to purchase interests in loans through secondary market transactions or directly from the target companies as primary market investments. It also seeks to invest in first lien senior secured loans, second lien secured loans and, to a lesser extent, subordinated loans, or mezzanine loans. In connection with the debt investments, the firm also receives equity interests such as warrants or options as additional consideration. It also seek to purchase minority interests in the form of common or preferred equity in our target companies, either in conjunction with one of the debt investments or through a co-investment with a financial sponsor. Additionally, on an opportunistic basis, the fund may also invest in corporate bonds and similar debt securities. The fund does not seek to invest in start-up companies, turnaround situations, or companies with speculative business plans. It seeks to invest in small and middle-market companies based in United States. The fund seeks to invest in firms with annual revenue between $10 million to $2.5 billion. It focus on providing customized one-stop credit solutions to private upper middle market companies with annual EBITDA of $50 million to $100 million at the time of investment. It seeks to exit from securities by selling them in a privately negotiated over- the- counter market. For any investments that are not able to be sold within the secondary market, the firm seeks to exit such investments through repayment, an initial public offering of equity securities, merger, sale or recapitalization.

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.