New Mountain Finance (NASDAQ:NMFC – Get Free Report) and XP (NASDAQ:XP – Get Free Report) are both finance companies, but which is the superior investment? We will compare the two businesses based on the strength of their risk, earnings, profitability, dividends, analyst recommendations, valuation and institutional ownership.
Risk & Volatility
New Mountain Finance has a beta of 0.58, indicating that its share price is 42% less volatile than the S&P 500. Comparatively, XP has a beta of 1.18, indicating that its share price is 18% more volatile than the S&P 500.
Institutional and Insider Ownership
32.1% of New Mountain Finance shares are owned by institutional investors. Comparatively, 59.2% of XP shares are owned by institutional investors. 14.9% of New Mountain Finance shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a stock is poised for long-term growth.
Dividends
New Mountain Finance pays an annual dividend of $1.00 per share and has a dividend yield of 14.6%. XP pays an annual dividend of $0.40 per share and has a dividend yield of 2.7%. New Mountain Finance pays out -185.2% of its earnings in the form of a dividend. XP pays out 20.9% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. New Mountain Finance is clearly the better dividend stock, given its higher yield and lower payout ratio.
Analyst Recommendations
This is a summary of recent ratings and price targets for New Mountain Finance and XP, as provided by MarketBeat.
| Sell Ratings | Hold Ratings | Buy Ratings | Strong Buy Ratings | Rating Score | |
| New Mountain Finance | 2 | 4 | 0 | 0 | 1.67 |
| XP | 0 | 5 | 4 | 0 | 2.44 |
New Mountain Finance presently has a consensus price target of $7.50, indicating a potential upside of 9.65%. XP has a consensus price target of $23.83, indicating a potential upside of 61.04%. Given XP’s stronger consensus rating and higher possible upside, analysts clearly believe XP is more favorable than New Mountain Finance.
Profitability
This table compares New Mountain Finance and XP’s net margins, return on equity and return on assets.
| Net Margins | Return on Equity | Return on Assets | |
| New Mountain Finance | -21.29% | 10.71% | 4.55% |
| XP | 27.20% | 22.19% | 1.33% |
Earnings & Valuation
This table compares New Mountain Finance and XP”s gross revenue, earnings per share and valuation.
| Gross Revenue | Price/Sales Ratio | Net Income | Earnings Per Share | Price/Earnings Ratio | |
| New Mountain Finance | $327.08 million | 1.98 | $16.49 million | ($0.54) | -12.67 |
| XP | $3.30 billion | 2.41 | $925.91 million | $1.91 | 7.75 |
XP has higher revenue and earnings than New Mountain Finance. New Mountain Finance is trading at a lower price-to-earnings ratio than XP, indicating that it is currently the more affordable of the two stocks.
Summary
XP beats New Mountain Finance on 12 of the 16 factors compared between the two stocks.
About New Mountain Finance
New Mountain Finance Corporation (NASDAQ: NMFC) is a business development company that provides financing to middle-market businesses. The company is externally managed by New Mountain Finance Advisers, an affiliate of New Mountain Capital, an investment firm focused on growth-oriented companies in industries such as business services, healthcare, software and technology. New Mountain Finance primarily invests in debt securities, including first-lien, unitranche, second-lien and unsecured loans.
About XP
XP Inc. is a Brazil-based financial services company that operates a digital investment platform. It offers individuals and businesses access to investment products and services, including brokerage, investment advice and wealth management. The company has expanded beyond investing into banking, credit, insurance and asset management. Its businesses include the XP, Rico and Clear platforms, which serve customers with different investment needs and preferences. Founded in 2001 as an investment advisory business, XP has grown into a broad financial services provider focused primarily on the Brazilian market.
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