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1. Company Snapshot

1.a. Company Description

New Mountain Finance Corporation (Nasdaq: NMFC), a business development company is a private equity / buyouts and loan fund specializes in directly investing and lending to middle market companies in “defensive growth” industries.The fund prefers investing in buyout and middle market companies.It also makes investments in debt securities at all levels of the capital structure including first and second lien debt, unsecured notes and mezzanine securities.


In some cases, its investments may also include equity interests.It targets energy, specialty chemicals and materials, trading companies and distributors, commercial printing, diversified support services, education services, environmental and facilities services, office services and supplies, media, distributors, health care services, health care facilities, application software, business services, systems software, federal services, distribution and logistics, interactive home entertainment, telecommunication services, hydroelectric power generation, electric power generation by fossil fuels, electric power generation by nuclear fuels, health care technology, and security and alarm services.The fund seeks to invest in United States of America.


It seeks to invest between $10 million and $50 million per transaction.The firm invests through both primary originations and open-market secondary purchases.It invests in companies with EBITDA between $10 million and $200 million and target investments up to a $125 million hold size.


The fund seeks a majority stake in its portfolio companies.

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1.b. Last Insights on NMFC

Negative drivers behind New Mountain Finance Corporation's recent performance include lagging earnings and revenue, which missed Zacks Consensus Estimates. The company's net investment income of $34.5 million, or $0.32 per weighted average share, fell short of expectations. Additionally, the decline in net asset value from $12.62 per share as of September 30, 2024, to $12.55 per share as of December 31, 2024, is a concern. Furthermore, the company's credit performance, while strong, has not been enough to offset these negative factors.

1.c. Company Highlights

2. NMFC Reports Solid Q3 Earnings, Advances Strategic Initiatives

New Mountain Finance Corporation delivered a robust financial performance in Q3 2025, with adjusted net investment income coming in at $0.32 per share, perfectly covering the $0.32 per share dividend. The earnings per share (EPS) of $0.32 matched analyst estimates, demonstrating the company's ability to maintain a stable income stream. Total assets stood at $3.1 billion, with $3 billion in investments at fair value, while total liabilities were $1.8 billion, resulting in a net debt-to-equity ratio of 1.23:1. The company's effective incentive fee rate was 7.6%, contributing to a strong core income.

Publication Date: Nov -23

📋 Highlights
  • Dividend Coverage and Income:: Adjusted net investment income of $0.32 per share fully covered the $0.32 per share dividend, supported by recurring income and the dividend protection program.
  • Net Asset Value (NAV) and Portfolio Quality:: NAV per share declined to $12.06, with 95% of investments rated "green" on the heat map, reflecting strong portfolio quality despite the drop.
  • Stock Discount and Share Repurchases:: Shares trade at a 20% discount to book value, with $47 million repurchased under the $50 million program and a new $100 million buyback approved at an average price of $10.
  • Portfolio Sale Strategy:: Exploring a $500 million portfolio sale to diversify holdings, reduce PIK income, and fund potential debt paydowns or new loans, targeting position sizes of 2% or lower.
  • Financial Leverage and Capacity:: Net debt-to-equity of 1.23:1, $2.5 billion in borrowing capacity, and $700 million in revolver availability, ensuring liquidity for $256 million in unfunded commitments and near-term maturities.

Dividend Coverage and Yield

The dividend coverage ratio, as shown on Slide 27, indicates that NMFC has a comfortable cushion to maintain its dividend payout. With a dividend yield of 13.87%, the stock presents an attractive income opportunity for investors. The company's commitment to maintaining leverage within its target range and its strong core income position it well for future dividend payments.

Valuation and Pricing

NMFC's stock price implies a 20% discount to book value, with a Price-to-Book Ratio (P/B Ratio) of 0.76. This suggests that the stock may be undervalued, presenting a potential buying opportunity. The Dividend Yield of 13.87% further supports the attractiveness of the stock. Additionally, the company's Net Debt / EBITDA ratio of 2.12 indicates a manageable level of leverage.

Portfolio Quality and Strategic Initiatives

The company's loan portfolio is of high quality, with approximately 95% of investments rated as "green" on the heat map. NMFC's focus on defensive growth sectors and its disciplined underwriting approach have contributed to its strong track record of minimizing credit losses. The company is exploring a portfolio sale of up to $500 million in assets to accelerate progress on strategic initiatives, including diversifying its portfolio and reducing PIK income. As Steve Klinsky noted, the company's differentiated approach to direct lending has enabled it to deliver consistent, enhanced yield while minimizing credit losses.

Outlook and Conclusion

With a strong financial position, a high-quality loan portfolio, and a commitment to strategic initiatives, NMFC is well-positioned for future growth. The company's exploration of a portfolio sale and its efforts to diversify its portfolio and reduce PIK income are expected to drive long-term value creation. Analysts estimate next year's revenue growth at -8.4%, but NMFC's stable income stream and attractive dividend yield provide a solid foundation for investors.

3. NewsRoom

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New Mountain Finance: NAV Continues To Slide Through Q3 (Rating Downgrade)

Nov -29

Source: seekingalpha.com

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New Mountain Finance (NMFC) Q3 2025 Earnings Call Transcript

Nov -04

Source: seekingalpha.com

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New Mountain Finance Corporation Announces Financial Results for the Quarter Ended September 30, 2025

Nov -03

Source: businesswire.com

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New Mountain Finance: A 12.7% Dividend Yield, But It's Barely Covered

Sep -16

Source: seekingalpha.com

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This Stock Has A 12.23% Yield And Sells For Less Than Book

Sep -15

Source: forbes.com

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6 Small Cap Dividends With Super-Sized Yields Of Up To 19%

Sep -07

Source: forbes.com

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New Mountain Finance: Lackluster Growth Prospects For This BDC

Aug -25

Source: seekingalpha.com

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New Mountain Finance downgraded to Perform from Outperform at Oppenheimer

Aug -06

Source: https://thefly.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (10.30%)

6. Segments

Investment and Related Activities

Expected Growth: 10.3%

Middle-market companies' growing demand for debt and equity financing, coupled with New Mountain Finance Corporation's expertise in originating and investing in these securities, drives growth in interest income and capital gains.

7. Detailed Products

Direct Lending

New Mountain Finance Corporation provides direct lending services to middle-market companies, offering customized financing solutions to meet their unique needs.

Second Lien and Subordinated Debt

The company offers second lien and subordinated debt financing to support recapitalizations, acquisitions, and growth initiatives.

Unitranche Debt

New Mountain Finance Corporation provides unitranche debt financing, combining senior and subordinated debt into a single loan facility.

Equity Co-Investments

The company makes equity co-investments alongside its debt investments, providing additional capital to support portfolio companies.

Net Lease Financing

New Mountain Finance Corporation provides net lease financing solutions to companies with high-quality, long-term leases.

8. New Mountain Finance Corporation's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for New Mountain Finance Corporation is medium, as there are some alternative investment options available to customers, but they are not highly attractive.

Bargaining Power Of Customers

The bargaining power of customers is low, as New Mountain Finance Corporation has a diversified customer base and no single customer accounts for a significant portion of its revenue.

Bargaining Power Of Suppliers

The bargaining power of suppliers is medium, as New Mountain Finance Corporation relies on a few key suppliers for its operations, but it also has some flexibility to switch to alternative suppliers if needed.

Threat Of New Entrants

The threat of new entrants is high, as the financial services industry is highly competitive and new entrants can easily enter the market with innovative products and services.

Intensity Of Rivalry

The intensity of rivalry is high, as New Mountain Finance Corporation operates in a highly competitive industry with many established players, and it needs to continuously innovate and differentiate itself to maintain its market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 57.49%
Debt Cost 7.08%
Equity Weight 42.51%
Equity Cost 9.66%
WACC 8.17%
Leverage 135.27%

11. Quality Control: New Mountain Finance Corporation passed 2 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Stock-Card
SLR Investment

A-Score: 7.7/10

Value: 6.9

Growth: 6.6

Quality: 7.8

Yield: 10.0

Momentum: 5.0

Volatility: 10.0

1-Year Total Return ->

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Stock-Card
MidCap Financial

A-Score: 7.1/10

Value: 6.7

Growth: 5.8

Quality: 7.8

Yield: 10.0

Momentum: 3.0

Volatility: 9.7

1-Year Total Return ->

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Stock-Card
Fidus

A-Score: 6.8/10

Value: 3.5

Growth: 3.9

Quality: 7.3

Yield: 10.0

Momentum: 6.0

Volatility: 10.0

1-Year Total Return ->

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Stock-Card
New Mountain Finance

A-Score: 6.8/10

Value: 7.1

Growth: 4.1

Quality: 7.7

Yield: 10.0

Momentum: 2.0

Volatility: 9.7

1-Year Total Return ->

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Stock-Card
Capital Southwest

A-Score: 6.6/10

Value: 5.8

Growth: 3.2

Quality: 7.7

Yield: 10.0

Momentum: 3.0

Volatility: 9.7

1-Year Total Return ->

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Stock-Card
WhiteHorse Finance

A-Score: 5.6/10

Value: 5.9

Growth: 3.6

Quality: 5.2

Yield: 10.0

Momentum: 0.5

Volatility: 8.3

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

9.75$

Current Price

9.75$

Potential

-0.00%

Expected Cash-Flows