Contrasting CION Investment (NYSE:CION) and Morgan Stanley Direct Lending (NYSE:MSDL)

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

Valuation and Earnings

This table compares Morgan Stanley Direct Lending and CION Investment”s top-line revenue, earnings per share (EPS) and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Morgan Stanley Direct Lending	$275.66 million	6.44	$231.01 million	$2.97	6.69
CION Investment	$138.48 million	4.52	$95.31 million	$2.35	4.98

Morgan Stanley Direct Lending has higher revenue and earnings than CION Investment. CION Investment is trading at a lower price-to-earnings ratio than Morgan Stanley Direct Lending, indicating that it is currently the more affordable of the two stocks.

Profitability

This table compares Morgan Stanley Direct Lending and CION Investment’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Morgan Stanley Direct Lending	60.60%	12.57%	6.36%
CION Investment	48.50%	12.39%	5.48%

Analyst Ratings

This is a breakdown of recent recommendations and price targets for Morgan Stanley Direct Lending and CION Investment, as provided by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Morgan Stanley Direct Lending	0	5	1	0	2.17
CION Investment	0	2	0	0	2.00

Morgan Stanley Direct Lending presently has a consensus target price of $21.42, indicating a potential upside of 7.73%. CION Investment has a consensus target price of $12.25, indicating a potential upside of 4.61%. Given Morgan Stanley Direct Lending’s stronger consensus rating and higher possible upside, analysts plainly believe Morgan Stanley Direct Lending is more favorable than CION Investment.

Dividends

Morgan Stanley Direct Lending pays an annual dividend of $2.00 per share and has a dividend yield of 10.1%. CION Investment pays an annual dividend of $1.44 per share and has a dividend yield of 12.3%. Morgan Stanley Direct Lending pays out 67.3% of its earnings in the form of a dividend. CION Investment pays out 61.3% 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. CION Investment is clearly the better dividend stock, given its higher yield and lower payout ratio.

Institutional and Insider Ownership

32.0% of CION Investment shares are owned by institutional investors. 0.2% of Morgan Stanley Direct Lending shares are owned by company insiders. Comparatively, 0.1% of CION Investment shares are owned by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Summary

Morgan Stanley Direct Lending beats CION Investment on 12 of the 15 factors compared between the two stocks.

About Morgan Stanley Direct Lending

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.

About CION Investment

CION Investment Corporation is a business development company. It specializes in investments in senior secured loans, including unitranche loans, First Lien, second lien loans, long-term subordinated loans, and mezzanine loans; equity interests such as warrants or options; and corporate bonds; and other debt securities in middle-market companies. The firm invests in growth capital, acquisitions, leveraged buyouts, market/product expansion, refinancing and recapitalization. The fund also invests up to 30 percent of their assets opportunistically in other types of investments, including the securities of larger public companies and foreign securities. It also makes investments in the secondary loan market. The fund does not invest in start-up companies, turnaround situations, or companies with speculative business plans. The fund prefers to invest in high tech industries, healthcare, pharmaceuticals, business services, media, chemicals, plastic, rubber, telecommunication, consumer services, advertising, printing and publishing, consumer goods, durables, diversified financials, and other industries. It also invests in homebuilding, restaurants, beverage and tobacco bars, broadcasting, distributors, Non-durable good distribution, food beverage and tobacco, energy, oil gas and consumables fuels, insurance, aerospace and defense, industrial machinery, paper and forest product machinery, information technology, metals and mining, and real estate. It primarily seeks to invest in the United States. The fund seeks to invest between $5 million and $50 million in companies with an EBITDA between $25 million and $75 million with average targeted hold of $25 million. It also purchases minority interests in the form of common or preferred equity in the target companies, typically in conjunction with its debt investments or through a co-investment with a financial sponsor. The fund seeks to exit its investments through an initial public offering of common stock, a merger, a sale, or other recapitalization.