Head to Head Analysis: Golub Capital BDC (NASDAQ:GBDC) and New Mountain Finance (NASDAQ:NMFC)

Golub Capital BDC (NASDAQ:GBDC) and New Mountain Finance (NASDAQ:NMFC) are both finance companies, but which…


Golub Capital BDC (NASDAQ:GBDC) and New Mountain Finance (NASDAQ:NMFC) are both finance companies, but which is the better investment? We will compare the two companies based on the strength of their earnings, institutional ownership, analyst recommendations, risk, valuation, dividends and profitability.

Earnings and Valuation

This table compares Golub Capital BDC and New Mountain Finance’s revenue, earnings per share and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Golub Capital BDC $298.95 million 8.11 $54.87 million $1.22 11.89
New Mountain Finance $276.51 million 4.06 $112.56 million $1.27 9.13

New Mountain Finance has lower revenue, but higher earnings than Golub Capital BDC. New Mountain Finance is trading at a lower price-to-earnings ratio than Golub Capital BDC, indicating that it is currently the more affordable of the two stocks.

Profitability

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

Net Margins Return on Equity Return on Assets
Golub Capital BDC 18.35% 7.95% 3.99%
New Mountain Finance 4.94% 10.30% 3.93%

Dividends

Golub Capital BDC pays an annual dividend of $1.16 per share and has a dividend yield of 8.0%. New Mountain Finance pays an annual dividend of $1.20 per share and has a dividend yield of 10.4%. Golub Capital BDC pays out 95.1% 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 94.5% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Golub Capital BDC has raised its dividend for 1 consecutive years. New Mountain Finance is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional and Insider Ownership

36.9% of Golub Capital BDC shares are owned by institutional investors. Comparatively, 34.5% of New Mountain Finance shares are owned by institutional investors. 6.9% of Golub Capital BDC shares are owned by insiders. Comparatively, 9.1% of New Mountain Finance shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a stock will outperform the market over the long term.

Volatility & Risk

Golub Capital BDC has a beta of 0.69, meaning that its share price is 31% less volatile than the S&P 500. Comparatively, New Mountain Finance has a beta of 1.39, meaning that its share price is 39% more volatile than the S&P 500.

Analyst Ratings

This is a breakdown of recent ratings for Golub Capital BDC and New Mountain Finance, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Golub Capital BDC 0 2 1 0 2.33
New Mountain Finance 0 1 3 0 2.75

Golub Capital BDC presently has a consensus price target of $11.75, suggesting a potential downside of 18.97%. New Mountain Finance has a consensus price target of $11.50, suggesting a potential downside of 0.78%. Given New Mountain Finance’s stronger consensus rating and higher possible upside, analysts clearly believe New Mountain Finance is more favorable than Golub Capital BDC.

Summary

New Mountain Finance beats Golub Capital BDC on 10 of the 17 factors compared between the two stocks.

About Golub Capital BDC

Golub Capital BDC, Inc. is a business development company and operates as an externally managed closed-end non-diversified management investment company. It invests in debt and minority equity investments in middle-market companies that are, in most cases, sponsored by private equity investors. The company seeks to invest in the United States. It primarily invests in senior secured, one stop, unitranche, second lien, subordinated and mezzanine loans of middle-market companies, and warrants.

About New Mountain Finance

New Mountain Finance Corporation is a Business Development Company specializing in investments in middle market companies and debt securities at various levels of the capital structure, including first and second lien debt, unsecured notes, bonds, and mezzanine securities. It invests in various industries that include software, education, business services, distribution and logistics, federal services, healthcare services and products, healthcare facilities, energy, media, consumer and industrial services, healthcare Information Technology, Information Technology and services, specialty chemicals and materials, telecommunication, retail, and power generation. It seeks to invest in United States. It typically invests between $10 million and $50 million. Within middle market it seeks to invest in companies having EBITDA between $20 million and $200 million. It prefers to invest in equity interests, such as preferred stock, common stock, warrants, or options received in connection with its debt investments and directly in the equity of private companies. The fund makes investments through both primary originations and open-market secondary purchases. It invests primarily in debt securities that are rated below investment grade and have contractual unlevered returns of 10% to 15%. The firm may also invest in distressed debt and related opportunities and prefers to invest in targets having private equity sponsorship. It seeks to hold its investments between five years and ten years. The fund prefer to have majority stake in companies.



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