Fidus Investment (NASDAQ:FDUS) versus Morgan Stanley Direct Lending Fund (NYSE:MSDL) Critical Analysis

Fidus Investment (NASDAQ:FDUS) and Morgan Stanley Direct Lending Fund (NYSE:MSDL) are both small-cap finance companies, but which is the superior stock? We will contrast the two businesses based on the strength of their analyst recommendations, institutional ownership, earnings, valuation, profitability, risk and dividends.

Risk and Volatility

Fidus Investment has a beta of 0.92, meaning that its share price is 8% less volatile than the S&P 500. Comparatively, Morgan Stanley Direct Lending Fund has a beta of 0.34, meaning that its share price is 66% less volatile than the S&P 500.

Analyst Ratings

This is a summary of current ratings and price targets for Fidus Investment and Morgan Stanley Direct Lending Fund, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Fidus Investment	0	1	0	2	3.33
Morgan Stanley Direct Lending Fund	0	4	1	0	2.20

Fidus Investment currently has a consensus target price of $21.00, indicating a potential downside of 1.43%. Morgan Stanley Direct Lending Fund has a consensus target price of $20.00, indicating a potential upside of 3.63%. Given Morgan Stanley Direct Lending Fund’s higher probable upside, analysts plainly believe Morgan Stanley Direct Lending Fund is more favorable than Fidus Investment.

Dividends

Fidus Investment pays an annual dividend of $1.72 per share and has a dividend yield of 8.1%. Morgan Stanley Direct Lending Fund pays an annual dividend of $2.00 per share and has a dividend yield of 10.4%. Fidus Investment pays out 73.5% of its earnings in the form of a dividend. Morgan Stanley Direct Lending Fund pays out 91.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Profitability

This table compares Fidus Investment and Morgan Stanley Direct Lending Fund’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Fidus Investment	52.59%	11.48%	6.43%
Morgan Stanley Direct Lending Fund	47.65%	11.80%	5.70%

Valuation & Earnings

This table compares Fidus Investment and Morgan Stanley Direct Lending Fund”s gross revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Fidus Investment	$92.70 million	7.98	$78.29 million	$2.34	9.10
Morgan Stanley Direct Lending Fund	$191.55 million	8.86	$215.56 million	$2.18	8.85

Morgan Stanley Direct Lending Fund has higher revenue and earnings than Fidus Investment. Morgan Stanley Direct Lending Fund is trading at a lower price-to-earnings ratio than Fidus Investment, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

28.1% of Fidus Investment shares are owned by institutional investors. 1.4% of Fidus Investment shares are owned by insiders. Comparatively, 0.2% of Morgan Stanley Direct Lending Fund shares are owned by insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a company will outperform the market over the long term.

Summary

Fidus Investment beats Morgan Stanley Direct Lending Fund on 10 of the 17 factors compared between the two stocks.

About Fidus Investment

Fidus Investment Corporation is a business development company. It specializing in leveraged buyouts, refinancings, change of ownership transactions, recapitalizations, strategic acquisitions, mezzanine, growth capital, business expansion, lower middle market investments, debt investments, subordinated and second lien loans, senior secured and unitranche debt, preferred equity, warrants, subordinated debt, senior subordinated notes, junior secured loans, and unitranche loans. It does not invest in turnarounds or distressed situations. The fund prefers to invest in aerospace and defense, business services, consumer products and services including retail, food, and beverage, healthcare products and services, industrial products and services, information technology services, niche manufacturing, transportation and logistics, and value-added distribution sectors. It seeks to invest in companies based in United States. The fund typically invests between $5 million and $15 million per transaction in companies with annual revenues between $10 million and $150 million and an annual EBITDA between $3 million and $20 million, but it can occasionally invest in larger or smaller companies. It seeks to acquire minority equity stakes and board observation rights in conjunction with its investments.

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.