New Mountain Finance (NASDAQ: OCSI) and Oaktree Strategic Income (NASDAQ:OCSI) are both small-cap finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their dividends, institutional ownership, earnings, analyst recommendations, risk, profitability and valuation.

Valuation & Earnings

This table compares New Mountain Finance and Oaktree Strategic Income’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 $197.81 million 5.19 $109.39 million $1.29 10.47
Oaktree Strategic Income $46.57 million 5.44 -$8.76 million $0.76 11.32

New Mountain Finance has higher revenue and earnings than Oaktree Strategic Income. New Mountain Finance is trading at a lower price-to-earnings ratio than Oaktree Strategic Income, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares New Mountain Finance and Oaktree Strategic Income’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
New Mountain Finance 46.52% 10.11% 5.12%
Oaktree Strategic Income -4.80% 6.75% 3.28%

Risk and Volatility

New Mountain Finance has a beta of 0.54, meaning that its stock price is 46% less volatile than the S&P 500. Comparatively, Oaktree Strategic Income has a beta of 0.25, meaning that its stock price is 75% less volatile than the S&P 500.

Dividends

New Mountain Finance pays an annual dividend of $1.36 per share and has a dividend yield of 10.1%. Oaktree Strategic Income pays an annual dividend of $0.62 per share and has a dividend yield of 7.2%. New Mountain Finance pays out 105.4% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Oaktree Strategic Income pays out 81.6% 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 breakdown of current ratings and target prices for New Mountain Finance and Oaktree Strategic Income, as reported by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
New Mountain Finance 0 1 0 0 2.00
Oaktree Strategic Income 0 0 0 0 N/A

New Mountain Finance presently has a consensus price target of $15.00, suggesting a potential upside of 11.11%. Given New Mountain Finance’s higher possible upside, equities research analysts clearly believe New Mountain Finance is more favorable than Oaktree Strategic Income.

Institutional & Insider Ownership

37.0% of New Mountain Finance shares are owned by institutional investors. Comparatively, 28.9% of Oaktree Strategic Income shares are owned by institutional investors. 10.3% of New Mountain Finance shares are owned by insiders. Comparatively, 0.4% of Oaktree Strategic Income shares are owned by 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.

Summary

New Mountain Finance beats Oaktree Strategic Income on 11 of the 14 factors compared between the two stocks.

New Mountain Finance Company Profile

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.

Oaktree Strategic Income Company Profile

Oaktree Strategic Income Corporation, formerly Fifth Street Senior Floating Rate Corp., is a closed-end, non-diversified management investment company. The Company operates as a specialty finance company. The Company’s investment objective is to maximize its portfolio’s total return by generating current income from its debt investments while seeking to preserve its capital. The Company invests in senior secured loans, including first lien, unitranche and second lien debt instruments. The Company may also invest in unsecured loans, including subordinated loans, issued by private middle market companies, and senior and subordinated loans issued by public companies and equity investments. The senior loans that the Company targets have final maturities of 4 to 7 years. The Company seeks to invest in senior loans made primarily to private middle market companies. The Company‚Äôs investment advisor is Oaktree Capital Management, L.P.

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