Prospect Capital (PSEC) Given Sell Rating at National Securities

Prospect Capital (NASDAQ:PSEC)‘s stock had its “sell” rating reiterated by analysts at National Securities in a research note issued on Monday. They presently have a $4.00 price target on the financial services provider’s stock. National Securities’ target price points to a potential downside of 41.35% from the stock’s current price.

The analysts wrote, “• For fiscal 2Q18, PSEC posted NII/share of $0.20, exceeding our estimate by 2 cents. The market reaction to this beat was unwarranted but not surprising given the shareholder base of PSEC, in our opinion.

• Let’s run some numbers that are telling of the non-recurring income likely accrued during the quarter. PSEC’s total portfolio at amortized cost decreased by $320.7 million Q/Q to $5.56 billion. Additionally, the company received a particularly outsized amount of repayments and sales totaling a whopping $1.04 billion. Total revenue increased to $162.4 million from $158.6 million Q/Q despite the portfolio shrinking substantially. It isn’t exactly rocket science to figure out that a substantial amount of accelerated unamortized OID was likely a major contributor to interest income on the quarter.

• Looking at the expense side of the equation, total operating expenses declined to $89.2 million from $94.9 million Q/Q. PSEC received $1.4 million from its insurance carrier pertaining to its investment in Gulfco which likely drove other G&A to decline to $850,000 from $3.0 million on the quarter. Prospect Administration received $1.4 million from the insurance carrier and that was credited against overhead allocation during the quarter as well which is why overhead allocation expense went from $3.5 million to a credit of $824,000 Q/Q. Additionally, Gulfco itself directly paid Prospect Administration $1.2 million.

• Another anomaly during the quarter was that CLO income went up to $30.1 million from $29.4 million linked Q/Q despite the company’s reported CLO yields at cost declining 10 bps and the CLO portfolio at par remaining flat. Having declining yields, a flat portfolio, and more income from the said portfolio strikes us as odd.

• Additionally, we are wary of marks on the CLO book, NPRC, the online consumer loan portfolio, Atlantis Healthcare Group, Edmentum, Inc., and First Tower Finance Corp.

• We are revising our fiscal 2018 NII/share estimate to $0.73 from $0.71 and are maintaining our fiscal 2019 NII/share estimate of $0.66. “

Other analysts also recently issued research reports about the company. ValuEngine upgraded Prospect Capital from a “hold” rating to a “buy” rating in a research note on Friday, December 1st. Zacks Investment Research raised Prospect Capital from a “hold” rating to a “buy” rating and set a $7.75 price objective on the stock in a research report on Wednesday, January 17th. BidaskClub raised Prospect Capital from a “hold” rating to a “buy” rating in a research report on Friday, December 22nd. Finally, BMO Capital Markets reaffirmed a “hold” rating and issued a $7.00 price objective on shares of Prospect Capital in a research report on Monday, January 8th. One equities research analyst has rated the stock with a sell rating, six have assigned a hold rating and one has issued a buy rating to the stock. The stock presently has a consensus rating of “Hold” and an average price target of $6.81.

Prospect Capital (PSEC) traded up $0.05 during trading on Monday, hitting $6.82. The company had a trading volume of 2,427,159 shares, compared to its average volume of 2,570,000. The company has a debt-to-equity ratio of 0.73, a current ratio of 4.32 and a quick ratio of 4.32. The stock has a market cap of $2,460.00, a P/E ratio of 11.96 and a beta of 0.48. Prospect Capital has a 52 week low of $5.51 and a 52 week high of $9.58.

Prospect Capital (NASDAQ:PSEC) last posted its quarterly earnings results on Wednesday, February 7th. The financial services provider reported $0.20 earnings per share for the quarter, topping the consensus estimate of $0.18 by $0.02. The company had revenue of $162.40 million for the quarter, compared to the consensus estimate of $153.94 million. Prospect Capital had a return on equity of 8.36% and a net margin of 31.02%. The firm’s quarterly revenue was down 11.5% compared to the same quarter last year. During the same quarter in the prior year, the business posted $0.28 EPS. research analysts predict that Prospect Capital will post 0.72 earnings per share for the current fiscal year.

In other Prospect Capital news, insider John F. Barry acquired 995,883 shares of the stock in a transaction that occurred on Monday, November 20th. The shares were acquired at an average cost of $6.98 per share, with a total value of $6,951,263.34. Following the transaction, the insider now owns 25,219,413 shares of the company’s stock, valued at approximately $176,031,502.74. The transaction was disclosed in a filing with the Securities & Exchange Commission, which is accessible through this link. Also, insider John F. Barry acquired 162,826 shares of the stock in a transaction that occurred on Wednesday, November 22nd. The stock was acquired at an average cost of $6.72 per share, for a total transaction of $1,094,190.72. Following the completion of the transaction, the insider now directly owns 26,425,625 shares in the company, valued at approximately $177,580,200. The disclosure for this purchase can be found here. Insiders purchased a total of 4,439,521 shares of company stock worth $30,828,151 over the last ninety days. 7.10% of the stock is currently owned by insiders.

Hedge funds and other institutional investors have recently added to or reduced their stakes in the company. California Public Employees Retirement System lifted its holdings in shares of Prospect Capital by 2.7% during the 2nd quarter. California Public Employees Retirement System now owns 767,000 shares of the financial services provider’s stock valued at $6,228,000 after buying an additional 20,100 shares during the period. Sumitomo Mitsui Asset Management Company LTD bought a new position in shares of Prospect Capital during the 4th quarter valued at $2,544,000. GSA Capital Partners LLP lifted its holdings in shares of Prospect Capital by 277.0% during the 3rd quarter. GSA Capital Partners LLP now owns 149,438 shares of the financial services provider’s stock valued at $1,004,000 after buying an additional 109,803 shares during the period. Janney Montgomery Scott LLC lifted its holdings in shares of Prospect Capital by 86.9% during the 3rd quarter. Janney Montgomery Scott LLC now owns 87,689 shares of the financial services provider’s stock valued at $589,000 after buying an additional 40,765 shares during the period. Finally, Eqis Capital Management Inc. lifted its holdings in shares of Prospect Capital by 266.2% during the 4th quarter. Eqis Capital Management Inc. now owns 438,826 shares of the financial services provider’s stock valued at $2,958,000 after buying an additional 319,001 shares during the period. 14.66% of the stock is currently owned by hedge funds and other institutional investors.

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Prospect Capital Company Profile

Prospect Capital Corporation is a financial services company. The Company primarily lends to and invests in middle market privately held companies. The Company is a closed-end investment company. Its investment objective is to generate both current income and long-term capital appreciation through debt and equity investments.

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