Critical Review: New Mountain Finance Corporation (NYSE:NMFC) and Invesco Bond Fund (VBF)
New Mountain Finance Corporation (NYSE: NMFC) and Invesco Bond Fund (NYSE:VBF) are both small-cap finance companies, but which is the better investment? We will compare the two businesses based on the strength of their profitabiliy, risk, dividends, institutional ownership, earnings, valuation and analyst recommendations.
New Mountain Finance Corporation pays an annual dividend of $1.36 per share and has a dividend yield of 9.5%. Invesco Bond Fund pays an annual dividend of $0.84 per share and has a dividend yield of 4.2%. New Mountain Finance Corporation pays out 72.7% of its earnings in the form of a dividend.
This table compares New Mountain Finance Corporation and Invesco Bond Fund’s net margins, return on equity and return on assets.
|Net Margins||Return on Equity||Return on Assets|
|New Mountain Finance Corporation||78.68%||10.06%||5.34%|
|Invesco Bond Fund||N/A||N/A||N/A|
This is a breakdown of current ratings for New Mountain Finance Corporation and Invesco Bond Fund, as reported by MarketBeat.
|Sell Ratings||Hold Ratings||Buy Ratings||Strong Buy Ratings||Rating Score|
|New Mountain Finance Corporation||0||1||0||0||2.00|
|Invesco Bond Fund||0||1||0||0||2.00|
New Mountain Finance Corporation currently has a consensus target price of $15.00, indicating a potential upside of 4.53%. Invesco Bond Fund has a consensus target price of $32.00, indicating a potential upside of 59.36%. Given Invesco Bond Fund’s higher probable upside, analysts plainly believe Invesco Bond Fund is more favorable than New Mountain Finance Corporation.
Insider and Institutional Ownership
39.4% of New Mountain Finance Corporation shares are held by institutional investors. Comparatively, 23.1% of Invesco Bond Fund shares are held by institutional investors. 9.7% of New Mountain Finance Corporation shares are held by company insiders. Comparatively, 1.0% of Invesco Bond Fund shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company is poised for long-term growth.
Earnings and Valuation
This table compares New Mountain Finance Corporation and Invesco Bond Fund’s gross revenue, earnings per share and valuation.
|Gross Revenue||Price/Sales Ratio||EBITDA||Earnings Per Share||Price/Earnings Ratio|
|New Mountain Finance Corporation||N/A||N/A||N/A||$1.87||7.67|
|Invesco Bond Fund||N/A||N/A||N/A||N/A||N/A|
Volatility & Risk
New Mountain Finance Corporation has a beta of 0.58, indicating that its stock price is 42% less volatile than the S&P 500. Comparatively, Invesco Bond Fund has a beta of 0.21, indicating that its stock price is 79% less volatile than the S&P 500.
New Mountain Finance Corporation beats Invesco Bond Fund on 7 of the 9 factors compared between the two stocks.
About New Mountain Finance Corporation
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.
About Invesco Bond Fund
Invesco Bond Fund is a diversified, closed-end management investment company. The Fund’s investment objective is to seek interest income while conserving capital. The Fund invests primarily in fixed-rate the United States investment-grade corporate bonds with flexibility to integrate approximately 20% of its total assets in non-investment-grade, the United States dollar denominated and non-United States dollar denominated securities of foreign issuers (both developed and emerging markets). The Fund also invests in government securities, asset-backed securities, commercial mortgage-backed securities and residential mortgage-backed securities. The Fund also invests in derivatives and other instruments that have similar economic characteristics to securities, in which it invests. Invesco Advisers, Inc. serves as the investment advisor of the Fund.
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