New Mountain Finance Corp (NMFC) stock intrinsic value fair value estimate & owner earnings analysis

New Mountain Finance is a business development company: it holds a portfolio of loans and other investments (first lien, second lien, subordinated debt and equity) and its earnings are the interest and dividends that portfolio produces, less its own borrowing and operating costs. Because cash from operations is dominated by buying and selling portfolio investments, we measure what shareholders actually earn as net investment income plus realized gains and losses, and ignore the operating cash-flow line. What the record shows. Net investment income was $117.3 million in 2020, $118.8 million in 2021, $119.6 million in 2022, $159.9 million in 2023, $146.0 million in 2024 and $136.4 million in 2025. Realized gains and losses swing widely (a $53.5 million gain in 2022, losses of $32.8 million in 2023 and $41.4 million in 2024, a $43.2 million gain in 2025), but across 2020 through 2025 they net to only about +$15 million, so they are noise around zero over a full cycle. In the first half of 2026 realized losses were $77.0 million; we could not tie that figure to a specific portfolio event from the filings we reviewed. Total investment income was $374.8 million in 2023, $371.7 million in 2024 and $327.1 million in 2025, and $130.3 million in the first half of 2026 versus $169.2 million a year earlier. Net investment income in the first half of 2026 was $55.3 million versus $69.2 million, and $24.6 million in the second quarter alone. The balance sheet has been shrinking. Net asset value per share fell from $13.49 at the end of 2021 to $11.52 at the end of 2025 and $10.89 at June 30, 2026, roughly 4 to 5 percent a year, even though earnings were paid out in large part as distributions. Borrowings fell from $1.67 billion at the end of 2025 to $1.35 billion at June 30, 2026, and the 2022 convertible notes were repaid on October 15, 2025. The company repurchased $52.0 million of its shares in 2025 and $65.6 million in the first half of 2026, cutting shares outstanding from 102.6 million to 94.5 million. Our per-share history is stated on the reported diluted share count, which for 2020 to 2025 includes shares attributable to the convertible notes; with those notes gone, that dilution no longer applies, so we value on the roughly 94.5 million shares now outstanding. Starting level. Rather than using the 2020 to 2025 median (about $121 million a year), we start lower, because five consecutive quarters of falling net investment income (roughly $33 to $35 million a quarter in 2025 down to $30.6 million and then $24.6 million in 2026) and a shrinking loan book show the earning level has moved. We start from about $99 million of annualized net investment income (the second quarter of 2026 times four) less about $10 million a year for the average realized losses since 2020 including the first half of 2026, or about $89 million, which is $0.94 per share. Net investment income fell 6.6 percent in 2025; owner earnings including realized gains rose sharply that year only because of a $43.2 million realized gain. We therefore start the base case with a 7 percent decline in year one, below the trailing rate, with no reason from the filings to expect it to reverse. Base case: $8.70 per share. Earnings of $0.94 fall 7 percent in year one to about $0.87 and then keep declining 4 percent a year, in line with the multi-year erosion in net asset value per share and the falling investment income. We credit no growth: a larger loan book, higher spreads or more buybacks are not secured. The share repurchases are recent and not yet a demonstrated multi-year record, so we left them out. Ten years of this path and its continuation is worth about $8.70 at a 6 percent discount rate, below the June 2026 net asset value of $10.89 because the earning power is below what that asset base would need to sustain it. Bear case: $3.90 per share. Net investment income keeps falling about 8 percent a year from a $0.94 starting level, and realized credit losses of about $0.60 per share a year for three years (in line with the 2023 and 2024 losses and the pace so far in 2026), then about $0.15 a year for the next seven. The filings show non-accrual investments (for example the American Achievement Corporation position, $31.4 million cost and $18.0 million fair value at the end of 2025) and the company runs with meaningful borrowings, so a further credit down-cycle is a visible risk. Bull case: $12.70 per share. Net investment income holds at the current second-quarter run rate of about $1.04 per share and then erodes only 2 percent a year, with realized gains and losses netting to zero, as they did across 2020 to 2025. That is a little above the current net asset value, which we treat as about as good as can be supported. What could make this wrong. If the first-half 2026 realized losses prove a one-off and earnings stabilise near $1.04 per share, value moves toward the bull case; if credit losses continue at the first-half 2026 pace, it moves toward the bear case. Debt was not subtracted from value, because earnings are already after interest cost, and leverage is reflected in the bear case. Cash on the balance sheet is not added on top of the case values.