New Mountain Finance (NASDAQ:NMFC – Get Free Report) and FS KKR Capital (NYSE:FSK – Get Free Report) are both finance companies, but which is the better stock? We will contrast the two companies based on the strength of their earnings, institutional ownership, valuation, risk, dividends, profitability and analyst recommendations.
Dividends
New Mountain Finance pays an annual dividend of $1.28 per share and has a dividend yield of 12.3%. FS KKR Capital pays an annual dividend of $2.56 per share and has a dividend yield of 12.5%. New Mountain Finance pays out 128.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. FS KKR Capital pays out 134.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.
Volatility and Risk
New Mountain Finance has a beta of 0.8, suggesting that its share price is 20% less volatile than the S&P 500. Comparatively, FS KKR Capital has a beta of 0.97, suggesting that its share price is 3% less volatile than the S&P 500.
Analyst Recommendations
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| New Mountain Finance | 0 | 3 | 0 | 0 | 2.00 |
| FS KKR Capital | 1 | 5 | 0 | 0 | 1.83 |
New Mountain Finance currently has a consensus target price of $10.67, indicating a potential upside of 2.86%. FS KKR Capital has a consensus target price of $19.50, indicating a potential downside of 4.51%. Given New Mountain Finance’s stronger consensus rating and higher probable upside, analysts clearly believe New Mountain Finance is more favorable than FS KKR Capital.
Profitability
This table compares New Mountain Finance and FS KKR Capital’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| New Mountain Finance | 29.84% | 10.57% | 4.35% |
| FS KKR Capital | 31.53% | 11.78% | 5.27% |
Institutional & Insider Ownership
32.1% of New Mountain Finance shares are held by institutional investors. Comparatively, 36.3% of FS KKR Capital shares are held by institutional investors. 11.7% of New Mountain Finance shares are held by company insiders. Comparatively, 0.2% of FS KKR Capital shares are held by company 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 & Valuation
This table compares New Mountain Finance and FS KKR Capital”s gross revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| New Mountain Finance | $371.67 million | 3.01 | $113.44 million | $1.00 | 10.37 |
| FS KKR Capital | $1.72 billion | N/A | $585.00 million | $1.90 | 10.75 |
FS KKR Capital has higher revenue and earnings than New Mountain Finance. New Mountain Finance 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.
Summary
FS KKR Capital beats New Mountain Finance on 10 of the 14 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 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.
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