Morgan Stanley Direct Lending Fund (NYSE:MSDL – Get Free Report) and Main Street Capital (NYSE:MAIN – Get Free Report) are both finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their institutional ownership, valuation, risk, analyst recommendations, earnings, dividends and profitability.
Dividends
Morgan Stanley Direct Lending Fund pays an annual dividend of $1.80 per share and has a dividend yield of 13.1%. Main Street Capital pays an annual dividend of $3.18 per share and has a dividend yield of 5.7%. Morgan Stanley Direct Lending Fund pays out 260.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Main Street Capital pays out 64.1% of its earnings in the form of a dividend. Main Street Capital has raised its dividend for 4 consecutive years.
Volatility & Risk
Morgan Stanley Direct Lending Fund has a beta of 0.58, meaning that its stock price is 42% less volatile than the S&P 500. Comparatively, Main Street Capital has a beta of 0.74, meaning that its stock price is 26% less volatile than the S&P 500.
Profitability
| Net Margins | Return on Equity | Return on Assets | |
| Morgan Stanley Direct Lending Fund | 15.97% | 9.61% | 4.28% |
| Main Street Capital | 78.49% | 11.80% | 6.32% |
Valuation and Earnings
This table compares Morgan Stanley Direct Lending Fund and Main Street Capital”s gross revenue, earnings per share (EPS) and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Morgan Stanley Direct Lending Fund | $397.29 million | 2.90 | $122.09 million | $0.69 | 19.86 |
| Main Street Capital | $566.39 million | 9.18 | $493.40 million | $4.96 | 11.21 |
Main Street Capital has higher revenue and earnings than Morgan Stanley Direct Lending Fund. Main Street Capital is trading at a lower price-to-earnings ratio than Morgan Stanley Direct Lending Fund, indicating that it is currently the more affordable of the two stocks.
Institutional and Insider Ownership
20.3% of Main Street Capital shares are owned by institutional investors. 0.3% of Morgan Stanley Direct Lending Fund shares are owned by company insiders. Comparatively, 3.8% of Main Street Capital shares are owned by company insiders. Strong institutional ownership is an indication that endowments, large money managers and hedge funds believe a stock is poised for long-term growth.
Analyst Ratings
This is a breakdown of current ratings and target prices for Morgan Stanley Direct Lending Fund and Main Street Capital, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Morgan Stanley Direct Lending Fund | 0 | 6 | 1 | 0 | 2.14 |
| Main Street Capital | 0 | 5 | 5 | 0 | 2.50 |
Morgan Stanley Direct Lending Fund currently has a consensus price target of $15.50, suggesting a potential upside of 13.11%. Main Street Capital has a consensus price target of $61.67, suggesting a potential upside of 10.87%. Given Morgan Stanley Direct Lending Fund’s higher possible upside, analysts clearly believe Morgan Stanley Direct Lending Fund is more favorable than Main Street Capital.
Summary
Main Street Capital beats Morgan Stanley Direct Lending Fund on 14 of the 17 factors compared between the two stocks.
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.
About Main Street Capital
Main Street Capital Corporation is a business development company specializes in equity capital to lower middle market companies. The firm specializing in recapitalizations, management buyouts, refinancing, family estate planning, management buyouts, refinancing, industry consolidation, mature, later stage emerging growth. The firm also provides debt capital to middle market companies for acquisitions, management buyouts, growth financings, recapitalizations, and refinancing. The firm seeks to partner with entrepreneurs, business owners and management teams and generally provides “one stop” financing alternatives within its lower middle market portfolio. It prefers to invest in air freight and logistics, auto components, building products, chemicals, commercial services, computers, construction and engineering, consumer finance, consumer services, electronic equipment, energy equipment and services, financial services, health care equipment, health care providers, hotels, restaurants, and leisure, internet software and services, IT Services, machinery, oil, gas and consumable fuels, paper and forest products, professional and industrial services, road and rail, software, specialty retail, telecommunication, consumer discretionary, energy, materials, technology, and transportation. The firm typically invests in lower middle market companies generally with annual revenues between $10 million and $150 million. It prefers to invest in ranging between $5 million and $100 million in equity investment and enterprise value in ranging between $3 million and $20 million. The firm typically prefers to invest in the range of $5 million and $150 million per transaction in debt investment value and in the range of $3 million and $75 million in annual EBITDA in between $3 million and $25 million in lower middle market $5 million and $75 million in credit solution. The firm’s middle market debt investments are made in businesses that are generally larger in size than its lower middle market portfolio companies. It takes 5 percent minority and up to 50 percent majority equity investments. Main Street Capital Corporation was founded in 2007 and is based in Houston, Texas with an additional office in Chojnów, Poland.
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