Head to Head Review: Palmer Square Capital BDC (NYSE:PSBD) vs. Morgan Stanley Direct Lending Fund (NYSE:MSDL)

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

Analyst Recommendations

This is a breakdown of current recommendations and price targets for Palmer Square Capital BDC and Morgan Stanley Direct Lending Fund, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Palmer Square Capital BDC	0	4	0	0	2.00
Morgan Stanley Direct Lending Fund	0	6	1	0	2.14

Palmer Square Capital BDC currently has a consensus price target of $11.75, indicating a potential upside of 6.00%. Morgan Stanley Direct Lending Fund has a consensus price target of $15.54, indicating a potential downside of 1.42%. Given Palmer Square Capital BDC’s higher possible upside, equities analysts plainly believe Palmer Square Capital BDC is more favorable than Morgan Stanley Direct Lending Fund.

Volatility and Risk

Palmer Square Capital BDC has a beta of 0.87, meaning that its share price is 13% less volatile than the S&P 500. Comparatively, Morgan Stanley Direct Lending Fund has a beta of 0.56, meaning that its share price is 44% less volatile than the S&P 500.

Institutional and Insider Ownership

6.5% of Palmer Square Capital BDC shares are held by institutional investors. 1.1% of Palmer Square Capital BDC shares are held by insiders. Comparatively, 0.2% of Morgan Stanley Direct Lending Fund shares are held by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Profitability

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

	Net Margins	Return on Equity	Return on Assets
Palmer Square Capital BDC	-2.55%	10.82%	4.13%
Morgan Stanley Direct Lending Fund	30.73%	9.88%	4.49%

Earnings and Valuation

This table compares Palmer Square Capital BDC and Morgan Stanley Direct Lending Fund”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Palmer Square Capital BDC	$124.39 million	2.78	-$3.17 million	($0.11)	-100.77
Morgan Stanley Direct Lending Fund	$133.07 million	10.10	$122.09 million	$1.40	11.26

Morgan Stanley Direct Lending Fund has higher revenue and earnings than Palmer Square Capital BDC. Palmer Square Capital 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.

Dividends

Palmer Square Capital BDC pays an annual dividend of $1.44 per share and has a dividend yield of 13.0%. Morgan Stanley Direct Lending Fund pays an annual dividend of $1.80 per share and has a dividend yield of 11.4%. Palmer Square Capital BDC pays out -1,309.1% of its earnings in the form of a dividend. Morgan Stanley Direct Lending Fund pays out 128.6% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Palmer Square Capital BDC is clearly the better dividend stock, given its higher yield and lower payout ratio.

Summary

Morgan Stanley Direct Lending Fund beats Palmer Square Capital BDC on 9 of the 16 factors compared between the two stocks.

About Palmer Square Capital BDC

Palmer Square Capital BDC Inc. is an externally managed, non-diversified closed-end management investment company which primarily lends to and invests in corporate debt securities, including small to large private U.S. companies and has elected to be regulated as a business development company. Palmer Square Capital BDC Inc. is based in MISSION WOODS, Kan.

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.