Neutral Stance on Hercules - Analyst Blog
11 3월 2013 - 11:00PM
Zacks
On Mar 11, 2013, we reaffirmed our Neutral recommendation on
Hercules Technology Growth Capital, Inc. (HTGC)
based on its better-than-expected results, robust capital
deployment activities and huge growth prospects. However,
insufficient experience, concentration risk and stringent
regulatory landscape are expected to mar Hercules’ profitability in
the near to medium term.
Why the Neutral Stance?
Though Hercules’ fourth-quarter results (announced on Feb 28)
outpaced the Zacks Consensus Estimate, it came in line with the
prior quarter’s earnings. Better-than-expected quarterly results
were mainly driven by improvement in total investment income,
partly offset by higher interest expense, loan fees and increased
operating expenses.
Further, in the past 30 days, few estimates have moved up,
resulting in only a 0.9% improvement in the Zacks Consensus
Estimate for 2013. Estimates for 2014 have also improved by 2.5%
over the same period. In addition, over the past four quarters, the
average earnings surprise has been only 5.7% for this Zacks Rank #2
(Buy) stock.
The dividend growth story has been decent at Hercules. In Feb 2013,
the company last increased its quarterly dividend by about 4.2% to
25 cents per share, thereby boosting investors’ confidence in the
stock. Also, in 2012, it originated roughly $636.6 million in total
debt and equity commitments to new and existing portfolio
companies. The company continues to experience an increase in new
investment origination activities and expects the trend to persist
in the near future.
Yet, insufficient experience seems to be one of the major setbacks
for Hercules. The company is comparatively a new venture, having
commenced its investment operations late in 2004, and therefore has
a few records to offer in support of its investment approach.
Additionally, concentration risk and increased regulatory
compliance are likely to thwart its growth prospects.
Other Stocks to Consider
Other stocks in the same sector that are performing well and are
worth considering include American Capital, Ltd.
(ACAS), Golub Capital BDC, Inc (GBDC) and
Main Street Capital Corporation (MAIN). American
Capital and Golub Capital hold Zacks Rank #1(Strong Buy), whereas
Main Street carries a Zacks Rank #2.
AMER CAP LTD (ACAS): Free Stock Analysis Report
GOLUB CAPITAL (GBDC): Free Stock Analysis Report
HERCULES TECH (HTGC): Free Stock Analysis Report
MAIN STREET CAP (MAIN): Free Stock Analysis Report
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