Financial Comparison: Bain Capital Specialty Finance (NYSE:BCSF) versus Morningstar (NASDAQ:MORN)

Bain Capital Specialty Finance (NYSE:BCSF) and Morningstar (NASDAQ:MORN) are both finance companies, but which is the better stock? We will contrast the two businesses based on the strength of their analyst recommendations, risk, earnings, profitability, valuation, dividends and institutional ownership.

Analyst Ratings

This is a summary of current ratings and target prices for Bain Capital Specialty Finance and Morningstar, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Bain Capital Specialty Finance	1	3	0	0	1.75
Morningstar	0	1	2	0	2.67

Bain Capital Specialty Finance presently has a consensus price target of $12.60, indicating a potential upside of 18.59%. Morningstar has a consensus price target of $235.67, indicating a potential upside of 15.31%. Given Bain Capital Specialty Finance’s higher probable upside, equities analysts plainly believe Bain Capital Specialty Finance is more favorable than Morningstar.

Valuation & Earnings

This table compares Bain Capital Specialty Finance and Morningstar”s revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Bain Capital Specialty Finance	$273.24 million	2.52	$98.76 million	$0.99	10.73
Morningstar	$2.45 billion	3.13	$374.20 million	$10.56	19.35

Morningstar has higher revenue and earnings than Bain Capital Specialty Finance. Bain Capital Specialty Finance is trading at a lower price-to-earnings ratio than Morningstar, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Bain Capital Specialty Finance and Morningstar’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Bain Capital Specialty Finance	24.22%	10.40%	4.33%
Morningstar	16.43%	38.57%	12.22%

Insider & Institutional Ownership

57.0% of Morningstar shares are owned by institutional investors. 0.6% of Bain Capital Specialty Finance shares are owned by insiders. Comparatively, 38.8% of Morningstar shares are owned by insiders. Strong institutional ownership is an indication that endowments, hedge funds and large money managers believe a company will outperform the market over the long term.

Dividends

Bain Capital Specialty Finance pays an annual dividend of $1.68 per share and has a dividend yield of 15.8%. Morningstar pays an annual dividend of $2.00 per share and has a dividend yield of 1.0%. Bain Capital Specialty Finance pays out 169.7% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Morningstar pays out 18.9% of its earnings in the form of a dividend. Bain Capital Specialty Finance has increased its dividend for 4 consecutive years and Morningstar has increased its dividend for 16 consecutive years.

Risk and Volatility

Bain Capital Specialty Finance has a beta of 0.6, suggesting that its stock price is 40% less volatile than the S&P 500. Comparatively, Morningstar has a beta of 1.02, suggesting that its stock price is 2% more volatile than the S&P 500.

Summary

Morningstar beats Bain Capital Specialty Finance on 14 of the 17 factors compared between the two stocks.

About Bain Capital Specialty Finance

Bain Capital Specialty Finance, Inc. is business development company specializing in direct loans to middle-market companies. The fund seeks to invest in senior investments with a first or second lien on collateral, senior first lien, stretch senior, senior second lien, unitranche, mezzanine debt, junior securities, other junior investments, and secondary purchases of assets or portfolios that primarily consist of middle-market corporate debt. It typically invests in companies with EBITDA between $10 million and $150 million.

About Morningstar

Morningstar, Inc. provides independent investment insights in the United States, Asia. Australia, Continental Europe, the United Kingdom, and internationally. The company operates in five segments: Morningstar Data and Analytics; PitchBook; Morningstar Wealth; Morningstar Credit; and Morningstar Retirement. The company offers managing investments, including mutual funds, ETFs, separate accounts, collective investment trusts, model portfolios, equities, and fixed income securities; Morningstar Direct is an investment-analysis and reporting platform; Morningstar Advisor Workstation, a suite of tool to provide help and advice. The PitchBook segment provides data and research covering the private capital markets comprising venture capital, private equity, private credit and bank loans, and merger and acquisition activities; and pitchbook platform. It provides model portfolios and wealth platforms; Morningstar Managed Portfolios, an advisor service with model portfolios designed for fee-based independent financial advisors; and Morningstar.com that discovers, evaluates, and monitors stocks, ETFs, and mutual funds; build and monitor portfolios and markets. In addition, the company provides credit ratings, research, data, and credit analytics solutions; Morningstar DBRS which offers securitizations and other structured finance instruments, such as asset-backed securities, residential mortgage-backed securities, commercial mortgage-backed securities, and collateralized loan obligations. Further, it offers managed retirement accounts, fiduciary services, Morningstar Lifetime Allocation funds, and custom models; Morningstar Indexes offers market indexes used for performance benchmarks and as the basis for investment products and other portfolio strategies; and Morningstar Sustainalytics provides environmental, social and governance data, research, analysis, and insights. Morningstar, Inc. was incorporated in 1984 and is headquartered in Chicago, Illinois.