Head to Head Analysis: Goldman Sachs BDC (NYSE:GSBD) & Morgan Stanley Direct Lending Fund (NYSE:MSDL)

Morgan Stanley Direct Lending Fund (NYSE:MSDL) and Goldman Sachs BDC (NYSE:GSBD) are both small-cap finance companies, but which is the better business? We will contrast the two companies based on the strength of their profitability, institutional ownership, analyst recommendations, risk, dividends, earnings and valuation.

Risk and Volatility

Morgan Stanley Direct Lending Fund has a beta of 0.53, indicating that its share price is 47% less volatile than the S&P 500. Comparatively, Goldman Sachs BDC has a beta of 0.58, indicating that its share price is 42% less volatile than the S&P 500.

Insider and Institutional Ownership

28.7% of Goldman Sachs BDC shares are owned by institutional investors. 0.3% of Morgan Stanley Direct Lending Fund shares are owned by company insiders. Comparatively, 0.1% of Goldman Sachs BDC shares are owned by company insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a stock is poised for long-term growth.

Earnings and Valuation

This table compares Morgan Stanley Direct Lending Fund and Goldman Sachs BDC”s gross revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Morgan Stanley Direct Lending Fund	$397.29 million	3.21	$122.09 million	$1.01	14.88
Goldman Sachs BDC	$365.57 million	2.88	$119.27 million	$0.65	14.40

Morgan Stanley Direct Lending Fund has higher revenue and earnings than Goldman Sachs BDC. Goldman Sachs BDC 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.

Analyst Ratings

This is a breakdown of recent ratings and target prices for Morgan Stanley Direct Lending Fund and Goldman Sachs BDC, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Morgan Stanley Direct Lending Fund	0	6	1	0	2.14
Goldman Sachs BDC	2	4	0	0	1.67

Morgan Stanley Direct Lending Fund presently has a consensus price target of $15.54, suggesting a potential upside of 3.40%. Goldman Sachs BDC has a consensus price target of $9.17, suggesting a potential downside of 2.07%. Given Morgan Stanley Direct Lending Fund’s stronger consensus rating and higher probable upside, equities research analysts plainly believe Morgan Stanley Direct Lending Fund is more favorable than Goldman Sachs BDC.

Profitability

This table compares Morgan Stanley Direct Lending Fund and Goldman Sachs BDC’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Morgan Stanley Direct Lending Fund	22.84%	9.73%	4.37%
Goldman Sachs BDC	21.32%	10.94%	4.66%

Dividends

Morgan Stanley Direct Lending Fund pays an annual dividend of $1.80 per share and has a dividend yield of 12.0%. Goldman Sachs BDC pays an annual dividend of $1.28 per share and has a dividend yield of 13.7%. Morgan Stanley Direct Lending Fund pays out 178.2% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Goldman Sachs BDC pays out 196.9% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Summary

Morgan Stanley Direct Lending Fund beats Goldman Sachs BDC on 11 of the 16 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 Goldman Sachs BDC

Goldman Sachs BDC, Inc. is a business development company specializing in middle market and mezzanine investment in private companies. It seeks to make capital appreciation through direct originations of secured debt, senior secured debt, junior secured debt, including first lien, first lien/last-out unitranche and second lien debt, unsecured debt, including mezzanine debt and, to a lesser extent, investments in equities. The fund primarily invests in United States. It seeks to invest between $10 million and $75 million in companies with EBITDA between $5 million and $75 million annually.