This week’s Stock of the Week is a careful company with a narrow focus.
New Mountain Finance Corporation (NMFC) is a business-development company specializing in middle-market, privately held companies. That means it has a very targeted and disciplined lending approach, focusing on companies in a specific earnings band—firms to which, for various reasons, banks do not typically lend.
New Mountain invests $10 million to $50 million at a time in companies with earnings before interest, taxes, depreciation and amortization (EBITDA) of $20 million to $200 million. It finds the companies through proprietary research done by a large private equity firm of which New Mountain is a part.
New Mountain’s investments tend to be contra-cyclical businesses or ones not tied to economic cycles, such as data processors and government contractors. The extreme care New Mountain takes in lending means it has very few bad debts, only about 2%. And the company is strongly driven to give investors a very high, secure dividend. It is currently $1.36/share/yr., recently yielding 9.94%. Revenue was $232 million last year and will likely rise to $257 million this year and $296 million in 2020.
Fiscal year: December. Earnings per share: 2020 est./$1.48…2019 est./$1.39…2018/$1.34.
Dennison T. (Dan) Veru is co-chairman and chief investment officer, Palisade Capital Management, LLC, Fort Lee, New Jersey, which has $3.8 billion under management. PalisadeCapital.com