Morgan Stanley Direct Lending Fund (NYSE:MSDL – Get Free Report) and WhiteHorse Finance (NASDAQ:WHF – Get Free Report) are both small-cap finance companies, but which is the better stock? We will compare the two companies based on the strength of their risk, analyst recommendations, institutional ownership, valuation, dividends, earnings and profitability.
Dividends
Morgan Stanley Direct Lending Fund pays an annual dividend of $2.00 per share and has a dividend yield of 12.3%. WhiteHorse Finance pays an annual dividend of $1.54 per share and has a dividend yield of 22.1%. Morgan Stanley Direct Lending Fund pays out 103.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. WhiteHorse Finance pays out 1,026.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. WhiteHorse Finance has increased its dividend for 3 consecutive years. WhiteHorse Finance is clearly the better dividend stock, given its higher yield and longer track record of dividend growth.
Risk and Volatility
Morgan Stanley Direct Lending Fund has a beta of 0.25, meaning that its stock price is 75% less volatile than the S&P 500. Comparatively, WhiteHorse Finance has a beta of 0.75, meaning that its stock price is 25% less volatile than the S&P 500.
Valuation & Earnings
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| Morgan Stanley Direct Lending Fund | $172.27 million | 8.22 | $215.56 million | $1.93 | 8.45 |
| WhiteHorse Finance | $9.51 million | 17.05 | $10.85 million | $0.15 | 46.53 |
Morgan Stanley Direct Lending Fund has higher revenue and earnings than WhiteHorse Finance. Morgan Stanley Direct Lending Fund is trading at a lower price-to-earnings ratio than WhiteHorse Finance, indicating that it is currently the more affordable of the two stocks.
Profitability
This table compares Morgan Stanley Direct Lending Fund and WhiteHorse Finance’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| Morgan Stanley Direct Lending Fund | 42.65% | 11.24% | 5.28% |
| WhiteHorse Finance | 4.36% | 10.72% | 4.51% |
Insider and Institutional Ownership
13.2% of WhiteHorse Finance shares are owned by institutional investors. 0.2% of Morgan Stanley Direct Lending Fund shares are owned by company insiders. Comparatively, 2.5% of WhiteHorse Finance shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company is poised for long-term growth.
Analyst Ratings
This is a breakdown of recent ratings for Morgan Stanley Direct Lending Fund and WhiteHorse Finance, as reported by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| Morgan Stanley Direct Lending Fund | 1 | 4 | 1 | 0 | 2.00 |
| WhiteHorse Finance | 3 | 4 | 0 | 0 | 1.57 |
Morgan Stanley Direct Lending Fund presently has a consensus target price of $18.60, indicating a potential upside of 14.08%. WhiteHorse Finance has a consensus target price of $9.17, indicating a potential upside of 31.33%. Given WhiteHorse Finance’s higher probable upside, analysts clearly believe WhiteHorse Finance is more favorable than Morgan Stanley Direct Lending Fund.
Summary
Morgan Stanley Direct Lending Fund beats WhiteHorse Finance on 9 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 WhiteHorse Finance
WhiteHorse Finance, Inc. is business development company, non-diversified, closed end management company specializing in originating senior secured loans, lower middle market, growth capital industries. It invests in broadline retail, office services and supplies, building products, health care services, health care supplies, research and consulting services, application software, home furnishings, specialized consumer services, data processing and outsourced services, leisure facilities, cable, and satellite. It prefers to invest in United States. It typically invests between $5 million to $25 million in companies having enterprise value of between $50 million and $350 million.
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